Eco Animal Health Group PLC Annual Report 2023

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FY2023 Annual Report · Eco Animal Health Group PLC

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Registered Office

The Grange,
100 High Street,
Southgate,
N14 6BN

Tel: +44 (0)20 8447 8899

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ECO ANIMAL HEALTH
GROUP PLC

www.ecoanimalhealthgroupplc.com

Annual Report & Accounts

for the year ended 31 March 2023

Contents

Strategic Report

Financial Highlights

Operations Highlights

Chairman and Chief Executive’s Combined
Statement

Finance Director’s Report

Principal Risks and risk management

Corporate Governance

Corporate Governance Report

Directors’ Report

Independent Auditor’s Report

Financial Statements

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated Statement of Changes in Equity

Statement of Changes In Equity

Statements of Financial Position

Statements of Cash Flows

Notes to the Consolidated Financial Statements

DIRECTORS
AND ADVISERS

Directors

Andrew Jones

Non-Executive Chairman

David Hallas

Chief Executive

Christopher Wilks Finance Director

Frank Armstrong

Non Executive Director

Tracey James

Non Executive Director

Secretary

Christopher Wilks

Company Number

1818170

Registered Office

Registered Auditors

Registrars

Lawyers

Bankers

Nominated Adviser
And Broker

Joint Broker

The Grange
100 High Street
London
N14 6BN

Haysmacintyre LLP
10 Queen Street Place
London
EC4R 1AG

Share Registrars Limited
3 The Millennium Centre
Crosby way
Farnham
Surrey
GU9 7XX

Mills & Reeve LLP
24 King William Street
London
EC4R 9AT

Natwest plc
Tooting Branch, 30 High Street
London
SW17 0RG

Singer Capital Markets
One Bartholomew Lane
London
EC2N 2AX

Investec
30 Gresham Street
London
EC2V 7QP

Highlights

I am pleased to present
these results, which
also represent the first
full financial year since
I became CEO. I am
delighted that the Group
has performed robustly,
with encouraging
growth in revenues; and
profitability whilst also
significantly improving
our cash position. The
strong performance in
the second half of the
year has continued and
we are delighted that this
momentum is evident in
buoyant trade currently
and, notwithstanding
challenges in certain
markets, we look forward
to the rest of the current
financial year with
cautious optimism.

We have previously
spoken of the strength
and depth of our R&D
portfolio and I remain
convinced that this is a
primary driver of future
ECO success. I look
forward to presenting
our results and meeting
investors in person
during our results
meetings or at our AGM
in September.

David Hallas, CEO of ECO
Animal Health Group plc

Financial Highlights

Group sales

Adjusted EBITDA

£85.3m +4%

(2022: £82.2)

£7.2m

(2022: £5.4m)

Gross margin

Adjusted EBITDA margin

+45%

(2022: 43%)

8.5%

(2022: 6.6%)

Revenue and adjusted EBITDA ahead of market expectations

Group sales increased by 4% to £85.3m, driven primarily by growth
in revenues from South & Southeast Asia (excl. China and Japan) and
Latin America

• China and Japan sales representing 31% of group sales (2022: 35%),

declined by 7%

• Rest of world sales increased by 9%

New product development expenditure £8.3m (2022: £9.0m) as planned

Earnings per share 1.49p (2022: loss per share 1.01p)

Net cash at the end of the period £21.7m (2022: £14.3m), reinforcing the
Group’s strong balance sheet

RCF facility (£10m) available and undrawn

Operations Highlights

Aivlosin® demand remained strong in key markets, with increasing
market share

Unwinding of stock, as new China factory becomes operational

Continuing positive progress towards regulatory filing for poultry
mycoplasma vaccines

New partnership with Imperial College London for self-amplifying RNA
technology to deliver swine vaccines and biologics

New partnership with Moredun Research Institute to deliver a poultry
red mite vaccine

ECO Animal Health Group Plc Annual Report 2022/23FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTIntroduction to ECO

About ECO

ECO Animal Health Group is
a publicly quoted profitable
animal health biotech
company. It provides
quality products for swine
and poultry, primarily
anti-infectives to treat
illness, improve health and
performance.

The Company has a highly regarded and
profitable product with Aivlosin® and it is proud
to play an important part in the supply of healthy,
nutritious, and safe food to swine and poultry.

ECO operates through a network of partnerships
in key markets around the globe.

We have multiple global
offices and sales in more
than 70 countries

www.ecoanimalhealthgroupplc.com

ECO Animal Health Group Plc Annual Report 2022/23

ECONOMICS

The origin of our name. We provide good value to our
customers, our shareholders and employees.

ECOSYSTEM

We are a community, interacting harmoniously and
effectively together.

RECOGNITION

We recognise the hard work, dedication and results
delivered every day.

RECOMENDATION

Our product and customer services encourage our
clients to recommend us to others.

RECONSTRUCT

We are constantly evolving, improving, and building
on what we have.

RECONCILE & RECOVER

We learn and find ways to reconcile and become
stronger individually and as a team.

BECOME

We aim high and will continue to achieve and aspire.

ECO facts

Aivlosin® is one of the 30
largest brands in the $40
billion global animal health
industry and one of the Top
10 livestock brands.

ECO has a unique model
of managing upstream
partnerships for R&D and
manufacturing, as well as
downstream commercial
partners.

The business is agile and
able to make quick decisions.
ECO is international through
choice and necessity and
is adept at managing those
complexities.

ECO’s goals – our future aims
are:

1 ECO is well positioned to invest in R&D to

develop new products and provide a second
revenue stream alongside Aivlosin® whilst
remaining focused on swine and poultry, and
infectious diseases.

2 ECO will continue to develop Aivlosin® and

reach countries, species and medical claims
which are not fully exploited.

3 ECO will continue to make strategic earnings

enhancing partnerships or acquisitions to build
on its core strengths.

4 ECO will listen and strive to create a working

environment second to none.

5 ECO will continue to foster relationships in

all areas of the business and identify growth
opportunities.

Road to success

To achieve these aims, ECO will develop and adapt
in the following areas:

•

become less dependent on Aivlosin® (which
generates over 80% of our revenues).

develop new products and markets to drive
future growth.

enter the poultry space in the US and other
major poultry markets.

secure the manufacturing of existing and future
products.

mature as a team and organisation,
understanding the ambitions of the employees
and aligning them with the ambitions of the
Company.

ECO Animal Health Group Plc Annual Report 2022/23FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTChairman and Chief Executive’s Combined Statement

for the year ended 31 March 2023

Having successfully navigated amidst difficult market
conditions, we are pleased to report a robust performance
of the Group. Despite facing numerous obstacles and
uncertainties, ECO has emerged stronger and more
determined than ever. Our people have been the true
driving force behind our resilience. Their unwavering
dedication, adaptability, and persistence have been
instrumental in overcoming the challenges.

Operational Review
Revenues for the period increased to
£85.3m along with increasing profitability
driven by both customer and market mix:
gross margin was up at 45% (2022: 43%)
and EBITDA increased to £7.2m (2022:
£5.4m). This healthy performance was
delivered primarily in the second half of
the year and we are delighted to report
that this momentum has continued into
the new financial year.

ECO saw strong performance in all
regions: the Group generated particularly
strong growth (+42%) in South &
Southeast Asia driven by an impressive
performance in Thailand and greater
poultry sales in India. ECO is also pleased
to report further development in Latin
America, which delivered double digit
growth. The presence of ECO in all major
swine and poultry producing countries
globally helps to mitigate the impact from
individual market downturns.

Sales of Aivlosin®, our patented
antimicrobial which is used under
veterinary prescription for the treatment
of economically important respiratory
and gastrointestinal diseases in pigs and
poultry, reached £75.9m in FY2023 (2022:
£72.9m). Demand was stronger than
expected in China and Asia.

Sales of the smaller Ecomectin® anti-
parasitic range were £3.6m (2022: £5.5m)
with sales of all other products reaching
£5.8m (2022: £3.7m).

In China, the Group has completed on
schedule a plant for packaging and
finishing final product which has provided
greater automation and adherence to the
high regulatory compliance requirements.
During the construction process
inventories were built up to £30m of
product. Since completion, we are pleased
to report that inventory levels have been
reduced considerably to approximately
£22m and continue to reduce to more
normalised levels.

Product Approvals
Additional product approvals were
obtained in the year for Aivlosin including
new label extensions for additional
diseases and one new country in Latin
America. Furthermore, since the year end,
the Group has been informed by the FDA
that a previous safety warning can now be
removed from the Aivlosin label in the USA
following trials which show that it is safe to
use in pregnant and lactating sows.

Innovation through Research
and Development
The Group is pleased to see further
progress within our portfolio of projects
and continues to invest into vaccine
R&D and in building our capability and
expertise. The Board has dedicated
significant efforts on its R&D programme
and the amount of innovation in the
pipeline is at its highest level.

Dr Andrew Jones

Chairman

David Hallas

Chief Executive

ECO Animal Health Group Plc Annual Report 2022/23STRATEGIC REPORT

CORPORATE GOVERNANCE

FINANCIAL STATEMENTS

ended 31 March 2023 but the Board
does intend to keep this under review in
the future as it recognises the value of
dividends to shareholders.

People
We extend our sincere gratitude to
our people, customers, partners, and
shareholders who have stood by us during
this journey. Their unwavering support
and trust have been instrumental in our
resilience. The Group remains committed
to delivering exceptional value, driving
innovation, and forging a bright future. ECO
has now concluded its first Group-wide
engagement survey, providing guidance to
improving activities and overall satisfaction
of all our people. We are pleased that this
first survey reported good engagement
and actions are underway to build on these
good foundations.

The Group has continued to strengthen the
Research & Development and Commercial
teams through strategic new hires. I would
like to extend a warm welcome to our new
appointments in our leadership team,
which include new heads of our Quality and
Regulatory Team and HR Director.

Outlook
Trading momentum from the second half
of FY2023 has continued into the first half
of the current financial year. In China, the
Group has seen improved trading and the
Asian and Latin American markets continue
the trend of delivering strong growth.
Production and operational efficiencies are
being driven by the leadership team and
this is expected to support margins going
forward. The R&D programme continues to
provide considerable excitement and game-
changing future product flow is confidently
expected. Despite the challenges from
continuing, sporadic African swine fever
outbreaks and commodity price pressures,
the Board is cautiously optimistic for the
remainder of this financial year and views
the future with confidence.

Dr Andrew Jones
Non-Executive Chairman

David Hallas
Chief Executive Officer

9 July 2023

We continue to invest in promising
projects with substantial value associated
with major diseases in swine and poultry.

Two late-stage development projects are
expected to be submitted and approved
by the end of next financial year (the year
ending 31 March 2024).

We have engaged an experienced
Contract Manufacturing Organisation
(“CMO”) and secured production for USA,
EU, LATAM and Asia for our new biological
products.

In June 2022, the Group announced a
collaboration with Imperial College London
to assess the veterinary application
of self-amplifying RNA technology,
representing the next generation of RNA
delivered medicines. In July 2022, the
Group signed a partnership agreement
with the Moredun Research Institute to
research and develop an effective first in
class vaccine solution for the sustainable
control of poultry red mite (“PRM”). Both of
these initiatives are progressing well and
we look forward to updating the market on
these in due course.

The Board believes that investment in
the exciting initiatives outlined above
should, over time, deliver significant
shareholder value and therefore these
are being prioritised ahead of the
payment of dividends, balancing also the
need for prudent management of cash
resources. Accordingly no dividend will
be recommended in respect of the year

ECO Animal Health Group Plc Annual Report 2022/23Finance Director’s Report

for the year ended 31 March 2023

I am delighted to report a year of strong financial
progress. Building on the foundations established in
the past three years and working with new leadership
we have delivered a year of robust growth in revenue
and profit terms whilst improving working capital
ratios and balance sheet strength. We have seen
growth in all major performance metrics.

A geographical analysis of revenue is as follows:

Revenue Summary (Year ended 31 March)

China and Japan

North America (USA and Canada)

South and Southeast Asia

Latin America

Europe

Rest of World and UK

2023
(£’m)

26.4

15.2

16.8

18.1

6.1

2.7

85.3

2022
(£’m) % change

28.4

16.4

11.8

15.8

6.4

(7%)

42%

15%

(5%)

3.4

(21%)

82.2

North America which comprises Canada
and the USA showed a small decline overall
compared with the year ended 31 March
2022. Canada is a mature market and
Aivlosin® enjoys a high market share in
this market. The USA had a slower second
half compared with prior years where
typically disease outbreaks have driven
strong demand for the Group’s products
in the final quarter of the year. This disease
driven demand was less pronounced in this
financial year.

South and Southeast Asia reported another
strong period of annual growth in revenue.
Specific strong demand arose from the
poultry industry in India and Thailand,
with other neighbouring countries also
performing well.

Latin America also experienced strong
growth in this financial year; principally
from Brazil but also showing good revenue
performance in Mexico in both swine
and poultry.

After some supply interruption in Spain
which arose from a regulatory change
requiring macrolides to be delivered in
water soluble form and not as in-feed

formulation, Europe recorded a small 5%
reduction in revenues.

Gross margins were 45% in the year
ended 31 March 2023 (2022: 43%). This
improvement in gross margins arose in
the main from the weakness of Sterling
compared with the US Dollar and the
Chinese Yuan. At net margin, both of these
effects were somewhat offset by the
currency effect on foreign denominated
administrative costs.

Administrative expenses, at £27.9m, were
16% higher than the prior year (£24.1m).
Sterling weakness, as mentioned above,
together with increased salary costs, travel
costs and depreciation drove the increase.

All R&D programmes progressed well
during the year and previously capitalised
R&D remained in good standing at the year
end with no indications of impairment.

Total expenditure on research and
development in the year was £8.3m
(2022: £9.0m).

Supporting the commercial performance of
our existing portfolio of businesses whilst
ensuring a robust controls environment
is in place to safeguard and maximise the
return on assets is central to the role of
the finance team, as well as supporting the
strategic growth ambitions of the Group.

Trading
Previous years have seen a pattern of
stronger trading in the second half of
the year. This is associated with disease
prevalence in pigs during the Northern
Hemisphere winter. This pattern of trading
has continued in the year ended 31 March
2023 with the second half accounting for
59% of the annual revenue. The primary
contributing segment to this weighting was
China and Japan, where the second half
represented 68% of the annual revenue. In
our interim report for the six months ended
30 September 2022 we stated that China
revenue had declined as a result of poor
producer margins and Covid impacts; in our
second half of year the zero-Covid policy in
China was relaxed and pork consumption
improved, coinciding with the customary
winter disease outbreaks providing a strong
end to our trading year in China.

Revenue from China and Japan in the
last four successive six-month trading
periods was £15.7m, £12.7m, £8.5m and
£17.9m, respectively. This underscores
the pork industry cycle in China since the
restocking of the herd in the year ended
31 March 2021. The recovery in the six
months to 31 March 2023 represented
a significant improvement in trading
conditions and producer margins. Japan
represents less than 5% of the segment’s
combined revenues.

ECO Animal Health Group Plc Annual Report 2022/23STRATEGIC REPORT

CORPORATE GOVERNANCE

FINANCIAL STATEMENTS

The total expenditure on R&D can be analysed as follows:

Research and development expenses – expensed in period

Year ended 31 March

2023
£000’s

5,920

2022
£000’s

7,621

Development expenditure – capitalised in intangible assets

2,419

1,421

Total expenditure

8,339

9,042

Overall R&D expenditure in the year was
8% lower than the prior year due largely to
timing and phasing of trial work. The portion
of this expenditure capitalised in the year
nearly doubled as a consequence of the
greater proportion of the expenditure
in the year ended 31 March 2023 being
applied to the late-stage poultry vaccine
programmes for mycoplasma prevention
in chickens. These projects are in the final
development stage and have met the
capitalisation requirements set out in IAS38
for the entire financial year.

EBITDA has historically represented a
key performance measure for the Group;
the removal of amortisation (which is a
significant annual non-cash charge to
profits), depreciation and other non-
cash charges to profit provides a good
indication of the underlying cash trading
performance of the business. The charge
for amortisation of intangible assets in
the year was £1.1m (2022: £1.1m). The
adjusted EBITDA at £7.2m in the year
ended 31 March 2023 was a significant
increase on the year ended 31 March
2022 (£5.4m). Furthermore, the adjusted
EBITDA margin (excluding foreign
exchange movements and expressed as a
percentage of revenue in the period) was
8.5% in the year ended 31 March 2023
compared with 6.6% in the year ended 31
March 2022. This increase in the adjusted
EBITDA margin arose principally from
improved gross margins and the effect of
operational gearing in the business.

Profit before income tax was significantly
stronger in the year ended 31 March 2023
at £4.4m (2022: £1.4m).

The Group’s effective tax rate has reduced
to 30% in the year ended 31 March 2023
(2022: 151%) due to lower net non-
deductible expenses, lower profitability
in high tax rate subsidiaries, increased
utilisation of past tax losses, offset by
lower R&D expenditure allowances. The UK
corporation tax rate moves to 25% with
effect from 1 April 2023; this should not
impact tax payable in the near term due to
the continuing availability of tax losses in
the UK.

Earnings per share (“EPS”) has improved
from a loss per share of 1.01 pence in the
year ended 31 March 2022 to 1.49 pence
profit per share in the year ended 31 March
2023 and diluted EPS has improved from
a loss per share of 1.01 pence in the year
ended 31 March 2022 to 1.47 pence
profit per share in the year ended
31 March 2023.

The consolidated cash position in the
Group has increased to £21.7m at 31
March 2023 from £14.3m at 31 March
2022. The consolidated cash position held
outside of China decreased to £4.1m at 31
March 2023 from £6.2m at 31 March 2022.
A portion of the China cash is repatriated
once per annum by dividend declaration;
the Group’s share of the cash distribution
from ECO Biok in China received in the
UK is 51%. During the year the dividend
received from ECO Biok was £1.8m –
related to the China profitability in the year
ended 31 December 2021 (2022: £2.2m
– related to year ended 31 December
2020). In addition, the Group received a first
dividend of £4.0m during the year from its
wholly owned entity in China.

The cash generated from operations was
significantly greater in the year ended
31 March 2023 at £18.4m (2022: £2.5m)
reflecting the increased profitability of the
Group and, most significantly, a release
of working capital from reduction in
inventories. Group inventory levels fell from
£30m at 31 March 2022 to £22.4m at 31
March 2023. The new factory in China was
successfully commissioned during the year
and the required inventory build ahead of
the shutdown period unwound by the end
of March 2023. Inventory days, expressed
as inventory level as a ratio of annual cost
of sales was 174 days at 31 March 2023
(2022: 234 days).

Trade receivables increased by 3%
proportional to the increase in revenues in
the year; the debtor days ratio remaining
consistent at around 114 days. The
Group’s £5m overdraft facility (undrawn
at the year end) remains in place and the
Group’s committed £10m Revolving Credit
Facility (“RCF”) has not been utilised to date.

Prior Year Adjustment
The prior year adjustment disclosed in
note 3 is a technical item relating to the
accounting for share options issued to
employees of subsidiary companies. The
adjustment affects ECO Animal Health
Group plc’s balance sheet only (not the
consolidated position) and moves the
cost of the share-based payment out of
the intercompany account and into the
investment in subsidiary account.

Audit
We are pleased to have completed the first
audit with Haysmacintyre LLP. The audit
has been a smooth process with good and
appropriate challenge and astute enquiry. I
would like to personally thank Haysmacintyre
for their work and, subject to their
reappointment at this year’s AGM, we look
forward to working with them again next year

Christopher Wilks
Finance Director

9 July 2023

ECO Animal Health Group Plc Annual Report 2022/23FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT8

ECO Animal Health Group Plc Annual Report 2022/23

Key Performance Indicators

A summary of the KPIs is as follows:

Revenues (£'m)

Gross margin (%)

42.7%

45.0%

82.2

85.3

90.0

75.0

60.0

45.0

30.0

15.0

0.0

50%

40%

30%

20%

10%

FY22

FY23

FY22

FY23

Adjusted EBITDA margin (%)

Cash balances (£'m)

8.5%

6.6%

21.7

14.3

24.0

21.0

18.0

15.0

12.0

9.0

6.0

3.0

0.0

FY22

FY23

FY22

FY23

Research & Development (£'m)

EPS (Pence)

10.0

8.0

6.0

4.0

2.0

0.0

9.0

8.3

7.6

5.9

2.4

1.4

Expensed
R&D

Capitalised
R&D

Total R&D
expenditure

4.0

3.0

2.0

1.0

0.0

1.0

2.0

1.49

1.01

FY22

FY23

ECO Animal Health Group Plc Annual Report 2022/23

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTPrincipal Risks and risk management

for the year ended 31 March 2023

The Group has an established process for
the identification and management of risk,
working within the governance framework.
Ultimately, the management of risk is the
responsibility of the Board of Directors and
the Audit Committee, working through the
business leadership team.

The Board’s role in risk management
includes promoting a culture that
emphasises integrity at all levels of
business operations and setting the
overall policies for risk management and
control. The programme to strengthen
business controls has continued
throughout this financial year and this is
resulting in improvements in management
information, timeliness of reporting and
risk management.

During the year the Enterprise Risk
Management framework continued to
be assessed by the Group’s leadership
team seeking areas for improvements

in how we identify and manage our risks.
Careful consideration was given to
identifying any other emerging risks. The
risks were reviewed on a quarterly basis
by the leadership team and the Board of
Directors.

Each risk area continues to have priority
controls allocated to it that are the
responsibility of the Executive Directors
to manage and review during the financial
year. This process inherently manages risk
by ensuring the principal risks are being
mitigated by prioritised business activity as
shown in the table below.

The principal risks are listed on the
following pages in order of significance by
category. We have made this assessment
by reference to the likelihood of each risk
occurring and assessing the potential
severity of impact it would have on
the business from high to low. These
ratings are tied directly to agreed and

documented metrics within the Enterprise
Risk Management framework. The impact
and likelihood ratings are assessed as
the residual level taking into account
the Group’s controls and mitigating
actions. We have noted the change in the
overall risk since the last presentation
or assessment of the risk. As there are
a range of impacts in all areas which are
mitigated to a high degree, the mitigations
in the form of control structures are shown
next to each identified risk.

During the year, we have identified four
new risks highlighted below.

10 ECO Animal Health Group Plc Annual Report 2022/23

Strategic Risks

Risk

Likelihood Controls

Impact Change in year

High reliance on one supplier for
key products.

M Business interruption insurance with a target of 6 months strategic

safety stock in place.

Reliance placed on key directors,
senior managers and staff
members.

Employee training to maintain
competencies and compliance
with regulations.

High dependency on a single
product.

Potential threat from
generic producers.

Product diversification initiatives.

NomCom –succession planning embedded.

New RemCom policies implemented:

•

Performance management, structured Bonus and LTIP for staff
and executive Directors.

Salary benchmarking and staff development.

Board makeup has strengthened to increase its capability.

All staff undergo mandatory training on pharmacovigilance, modern
slavery, cyber security and other pan-business risks. Regulation-
specific training is mandatory for all appropriate employees across the
business, and its undertaking is documented by the business within
employee files.

A training recording system is in place to monitor and record training
undertaken.

Innovation fund and development pipeline of new products:

•

Vaccines and other products.

Generic defence plans.

New product pipeline is maturing and several new product
initiatives are late stage developments.

H Generic defence strategy – combining strong brand management,
regulatory and legal stance in country with patent and trademark
infringement enforcement.

Aivlosin® technical superiority supported by market leading technical
knowledge and strain characterisation.

Ensure adequate supply and stock pressure in markets.

Product diversification initiatives.

Disease impact on growth (African
Swine Fever, Avian influenza,
Human pandemic).

M Global organisation driving strategy in other geographical territories.
Strategy to increase focus on poultry to reduce swine exposure.

Remote working capabilities established and proven.

Multiple new product launches
in a single year and quality
risk regarding new biologicals
manufacturing.

H Recruitment underway for additional resource. Planning and

preparation being rehearsed, working with experienced external
partners.

Regulatory creep resulting in
certain formulations not being sold
in certain markets.

notwithstanding the change of regulation in that market.

M The market in Spain continues to buy feed mix formulation
Maintenance of proactive approach to regulatory change.
Trend towards water soluble formulation favours the Group.

Political risk (eg Russia/Ukraine
conflict) impacts markets through
sanctions or trade difficulties.

Political risk – conflict or sanctions
reduces supply of pig feed onto
world markets which reduces
customer margins and demand for
the Group’s products.

M Current conflict does not impact any major markets for the

Group’s products.

Monitoring of customer profitability, market demands. The Group’s
products represent a small component of the overall costs of
animal production.

New risk

ECO Animal Health Group Plc Annual Report 2022/23FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTPrincipal Risks and risk management (continued)

Operational Risks

Risk

Likelihood Controls

Impact Change in year

Operational activities result in
environmental pollution.

Failure to achieve/maintain
Good Manufacturing Practice and
quality standards leading to supply
interruption.

Risk of trial failure impeding
registration and approval of
Pipeline products.

Risk that new products are not
as commercially successful as
predicted, upon release to the
market

Continuity of IT services.

Risk of business interruption due
to fire, flood, explosion, natural
disaster impacting ECO premises.

Risk of corporate manslaughter.

Seasonal and un-forecast
demand impact on supply chain
responsiveness.

Virtual supply chain - use of third parties limits our own exposure.
Internal and external audits of third party facilities. Staff training.

Regular competent authority inspections. Independent and
internal QA function. Audits of third party facilities. Track record of
successful audits. Functions now embedded and well established.

Multidisciplinary team to integrate marketing authorisations with
change control processes and artwork for labels.

High calibre staff recruited. Use of only reputable and well
established laboratories and subcontractors. Regular
replenishment of R&D pipeline to counteract effect of attrition.

Commercially trained staff. Ensure trials accurately predict the
performance of the product in the marketplace, and retrospective
reviews of business cases to identify incorrect assumptions.
Marketing department constantly monitor market developments.

M Retained IT consultancy monitor, investigate and improve the
IT infrastructure. Servers hosted on Azure cloud based system
with multiple daily back-ups to a second remote server. Active
monitoring and correction of system issues. Roll out of laptop
encryption. Constant aim to implement best in class security.

Business risk insurance cover. Business continuity plan. Cloud
based servers with immediate backup restoration. High level of staff
with remote working capability.

Team had demonstrated during the global Coronavirus pandemic
that they can operate remotely with the same level of efficiency.
Safety stocks in strategic markets.

Maintain adequate health and safety procedures and insurances.
Only responsible for one manufacturing plant, all other facilities are
third party contracted services.

Forecasting Project: Implementation of MRP, monthly Regional
S&OP meetings, increased manufacturing capacity in USA,
strategic review of lead times/responsiveness and the value benefit
of last minute customisation. Purchase order lead time extended
and multi- source supply chain implemented.

ECO Animal Health Group Plc Annual Report 2022/23Financial Risks

Risk

Likelihood Controls

Impact Change in year

Fraud and depletion of company
funds.

Cyber attack.

Insufficient funding for business
growth.

Currency.

Enhanced corporate governance. Implementing robust systems
and controls. Keep international cash balances to a minimum.
Daily/weekly monitoring of all bank account cash balances with
explanations for material increases and depletions of balances.

Change overseas local bank accounts to international banks with
internet access. Continuation of Internal Audit programme, with a
particular focus on LATAM.

Strong firewalls in place. Regular back up of data on
duplicate servers.

Continual review and strengthening of controls and security.

Cyber security assessments/audits and mandatory cyber security
awareness and training for staff is in place.

Cashflow and working capital management. Close monthly
monitoring of budget to actual results. RCF facility in place –
undrawn to date.

M Monitoring of exchange rates. Operationally transact in multiple
currencies which are held and switched when appropriate. Natural
hedges in the business (revenue in USD, principle component of
cost of goods in USD). SWAPS are used to manage currencies and
interest rates.

Interest rate risk.

M Use of SWAPS, fixed margin on RCF and Overdraft, credit control,

cash forecasting.

International bank sanctions
leading to cross-border banking
transaction failure.

Monitoring of international sanctions. Use of stable and
internationally recognised banks for banking transactions.
Tight credit control over customers in sensitive countries.

Recession in major regions of the
world (EU, NA, LATAM) leads to
reduced demand for the Group’s
products.

H Global teams continue to strengthen relationships, and business
with key customers and suppliers. Brand awareness and premium
positioning of product. Annual fixing of primary input costs.

ECO Animal Health Group Plc Annual Report 2022/23FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTCorporate
Governance

In this section

Chairman’s introduction
to governance

Board of Directors

Compliance with the Principles
of the QCA Code

Leadership and the Board

Section 172 Statement

ESG Report

Audit Committee Report

Remuneration Committee Report

Nomination Committee Report

Directors’ Report

Independent Auditor’s Report

14 ECO Animal Health Group Plc Annual Report 2022/23

Chairman’s introduction
to governance

I am pleased to introduce
this section on governance,
which describes the
activities of the Board and
its Committees during
FY2022-23 and in the
period since the end of
the year and how we have
ensured governance
remains central to delivering
on our strategy and the
successful operation of
our business.

Our strong governance structures and
processes support the Board and the
Executive Leadership Team in delivering
our strategy and creating value for
our stakeholders, whilst operating in a
sustainable manner.

This year we expanded our ESG reporting
to include further information on our
performance and strategy on diversity
and emissions. We invite you to read our
section on ESG in this Annual Report and
to visit our website for further information
www.ecoanimalhealth.com. We recognise
the importance of this disclosure and will
continue to develop our future activities
and reporting.

As an AIM quoted company, our
governance framework is underpinned
by the AIM Rules and we have adopted
the Quoted Companies Alliance (QCA)
Corporate Governance Code (the ‘QCA
Code’) as the benchmark for measuring
our adherence to good governance. In
addition to the QCA Code, we monitor
developments and guidance in the UK
Corporate Governance Code, applicable
to main market listed companies, to keep
abreast of matters which we feel could also
be embedded as best practice as part of
a progressive approach. The appointment
of Haysmacintyre LLP as our new external
auditors provided an additional opportunity
to review our governance framework to
ensure it is robust and meeting the needs
of the Group. The Board has also placed a
focus on ensuring its size and composition
allows the business to move forward with our
strategic objectives.

Our annual Board Performance Review,
conducted in accordance with the principles
of the QCA Code, had the following key
findings and discussion points:

•

During the last year there has been
significant improvement in preparation
and circulation of meeting materials

The composition of the Board is well
balanced and works well

•

Identification of the desire for another
NED with sector or market experience

• Board meeting conversations are well
rounded and includes challenge and
support

• Meetings could be more evenly spread

throughout the year

• More meeting time could be allocated
to strategic matters such as M&A
opportunities

• Suggestions around further

enhancement to the Board packs

•

Incorporation of guest attendees at
certain sections of the Board meetings

• Top priority corporate risks individually

canvassed

•

Succession planning for Board members

Development of outsourced Internal
Audit function

We also review the Investment Association
guidelines and seek to comply with these
where applicable. Our governance framework
is embedded within the Group’s culture and
provides the right approach for us to adapt
and be flexible to the changing demands
we need to address. The Board remains
committed to ensuring that our business has
a positive impact in environmental and social
areas and our governance will continue to
support our evolving sustainability strategy.

In the sections that follow, we set out our
governance structures, along with an
overview of how the Company complies
with the Principles of the QCA Code and
the Board Committee reports.

Dr Andrew Jones
Chairman

9 July 2023

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Board of Directors

Dr Andrew Jones

Chairman

David Hallas

Chief Executive

Christopher Wilks

Finance Director

Nomination Committee Chairman
Appointed 1 December 2017
Year of Birth 1960

Andrew has over 35 years
commercial experience in the life
science sector and has held a
range of senior positions, including
CEO Europe for Arysta Lifescience,
CEO Phoqus Pharmaceuticals plc,
Principal at Cap Gemini Ernst and
Young. He started his career in ICI
Agrochemicals (now Syngenta AG).
He is also Non-Executive Chairman
of RootWave (Ubiqutek Ltd) a UK
company developing technology
and products that use electricity to
kill weeds to provide a sustainable
alternative to chemical herbicides.
Andrew has a BSc degree and PhD in
agricultural biology.

Appointed 1 April 2022
Year of Birth 1964

Appointed 3 September 2019
Year of Birth 1964

David Hallas has over 30 years of
experience in the animal health
industry and is a qualified veterinarian.
He was previously managing director
of Sure Petcare, a wholly owned
subsidiary of Merck Inc. providing
digital based solutions to the
companion animal sector with sales
of over US$170m. Prior to this role,
he was Associate Vice President
of MSD Animal Health with full P&L
responsibility for mid Europe which
comprised a group of 7 European
countries with a combined revenue
of over US$450m; he has also held
senior global, regional and business
unit management roles in other
animal health businesses within
Merck, Schering Plough and Pfizer
(now Zoetis) and lived and worked
overseas including in the USA.
David has substantial experience
managing profitable growth through
the introduction of new products,
including vaccines, and successful
merger and acquisition integrations.

Chris has considerable experience
in the fields of both finance and
science. Chris began his career after
graduating from the University of
Durham with a BSc in Applied Physics
and Electronics. Initially he joined
Marconi Space Systems, applying his
degree skills to the design of power
systems for spacecraft. He then
trained as a Chartered Accountant
at Arthur Young (now EY), and after
qualifying as a Chartered Accountant
in audit, he became a manager in its
Corporate Finance team. Chris is a
Fellow of the Institute of Chartered
Accountants in England and Wales.

He is also currently a Non-Executive
director (and Chair of the Audit
Committee) of Kromek Group plc,
an AIM listed worldwide supplier of
radiation detection technology and
was previously Chief Financial Officer
of Signum Technology Limited,
a leading group of specialised
engineering businesses operating
in the safety and critical service flow
control sector, which he co-founded.
Prior to Signum Technology, Chris
was Chief Financial Officer at Sondex
plc, a specialist developer of technical
instruments for the oil and gas
industry.

ECO Animal Health Group Plc Annual Report 2022/23Dr Frank Armstrong

Tracey James

Remuneration Committee
Chairman

Independent Non-Executive
Director
Appointed 1 May 2020
Year of Birth 1957

Frank is a medical doctor, a Fellow
of the Royal College of Physicians
and a Fellow of the Faculty of
Pharmaceutical Medicine. He is
currently Non-Executive Chair of
Faron Pharmaceutical Oy (AIM), Non-
Executive Chair of BioCaptiva Limited,
Non-Executive Chair of Bloomsbury
Genetic Therapies Limited (BGT),
Non-Executive Chair of Newcells
Biotech Ltd and a Member of the
Court of the University of Edinburgh.
He has previously held Non-Executive
roles in listed companies with Summit
Therapeutics (AIM and NASDAQ),
Redx Pharma (AIM), Mereo Biopharma
(AIM and NASDAQ) and Juniper
Therapeutics (NASDAQ). He started
his career at ICI Pharma/Zeneca
Pharma before moving to Bayer AG
where he became head of worldwide
product development.

Audit Committee Chair

Independent Non-Executive Director
Appointed 1 December 2021
Year of Birth 1962

Tracey is a Chartered Accountant
who has spent 26 years with Grant
Thornton UK LLP, with the last 14
years as an Audit Partner. Tracey
was a member of Grant Thornton’s
Oversight Board and also served
on the Audit & Risk and Pensions
Committees. She was also previously
Finance Director of Karl Storz
Endoscopy Canada (1999-2000).
Tracey is currently a Non-Executive
Director and Chair of the Audit
Committee at specialist Engineering
and Technology recruitment solutions
business, Gattaca plc.

Attendance at meetings
All Committee and Board meetings held in the year were quorate. Directors’ attendance
during the year ended 31 March 2023 was as follows:

Board

Audit
Committee

Remuneration
Committee

Nomination
Committee

Number of formal meetings held

Andrew Jones

David Hallas

Chris Wilks

Tony Rawlinson
(resigned on 9 August 2022)

Frank Armstrong

Tracey James

Directors’ service agreements set out the time commitment from each director. Executive
Directors are expected to devote all or substantially all of their time to ECO and Non-Executive
Directors are required to commit up to three days per month to ECO matters.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Compliance with the Principles
of the QCA Code

Compliance with the Principles of the QCA Code
The Company’s shares are traded on the AIM market of the London Stock Exchange and as such, the Company is subject to the
continuing requirements of the AIM Rules for Companies. As stated in the Chairman’s introduction, the Board has adopted, and considers
the Company to be fully compliant with, the QCA’s Corporate Governance Code. The following table summarises how we apply the ten
principles of the QCA Code. The long form assessment of our compliance can be found on our website at www.ecoanimalhealth.com.

QCA Principle

Establish a strategy and
business model which
promote long-term value for
shareholders

Compliant
4

Explanation

The Board meets annually to review and approve the
strategy for the Group. The strategic plan and business
model are reviewed by the Executive Leadership Team on
an ongoing basis with updates to demonstrate delivery and
progress. Decisions of the Board are made in line with the
strategic plan and business model.

Further reading

The Directors’
Biographies
pages 16 to 17

Nomination Committee
report
page 33

Evaluate Board performance
based on clear and relevant
objectives, seeking
continuous improvement

Promote a culture that is
based on ethical values and
behaviours

Maintain governance
structures and processes
that are fit for purpose and
support good decision-
making by the Board

Communicate how the
Company is governed and is
performing by maintaining a
dialogue with shareholders
and other relevant
stakeholders

The Chairman evaluates the performance of the Board
through a combination of questionnaires and one-to-
one meetings with each Director. Succession planning
is recognised as a material topic for the Company and
is the responsibility of the Nomination Committee that
makes recommendations to the Board concerning Board
appointments.

Nomination Committee
report
page 33

The Board leads by example and makes decisions that
are in the best interests of the Group and its stakeholders.
Culture and ethics underpinned by a clear set of values
guiding decision making at all levels in the business.

The Introduction to
ECO
pages 2 to 3

The Board’s governance framework sets out leadership
and embedded delegated responsibilities. The Company
maintains appropriate governance structures and
processes according to its size and complexity. Clear
division of responsibility between the Non-Executive
Chairman and the Chief Executive. QCA Code compliance
and governance continuously reviewed by the Board and in
annual Board Effectiveness review.

Corporate Governance
Report
pages 14 to 40

Audit Committee
report
pages 26 to 28

The Board ensures that all stakeholders across the
business are actively engaged and making sure that the
business as a whole upholds its values and monitors
behaviour. Active engagement with shareholders through
meetings, presentations and roadshows and AGM. The
Annual and Interim Reports, play an important role in
presenting the Company’s position and prospects. All RNS
press releases are published on the Company’s website.

Corporate Governance
Report
pages 14 to 40

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Leadership and the Board

The Role of the Board
The Board comprises two Executive
Directors and three independent
Non-Executive Directors (including
the Chairman).

The Board is responsible for providing
effective leadership to promote the long
term success of the Company. There is a
formal list of matters reserved for the Board,
that may only be amended by the Board.
The key responsibilities of the Board include:

• setting the Company’s vision and

strategy;

• The CEO, David Hallas, is responsible for
the day-to-day running of the business
which includes implementation of
the strategy. He is supported by an
Executive Leadership Team (“ELT”)
who have management responsibility
for the business operations and
support functions. Relevant matters
are reported to the Board by the CEO
and, as appropriate, the FD and other
ELT members.

The role of the independent Non-Executive
Directors is to:

• provide oversight and scrutiny of the

• ensuring the necessary financial and

performance of the Executive Directors;

• constructively challenge to help develop
and execute on the agreed strategy;

• satisfy themselves as to the integrity of
the financial reporting systems and the
information they provide;

• satisfy themselves as to the robustness

of the internal controls;

• ensure that the systems of risk

management are robust and defensible;
and

•

review corporate performance and
the reporting of performance to
shareholders.

Board Committees
The Board has delegated and empowered
three Committees: an Audit Committee,
a Remuneration Committee, and a
Nomination Committee. Each Committee
has written terms of reference set by
the Board, which are reviewed annually
and are available on the Company’s
website. Membership of each Committee
is determined by the Board on the
recommendation of the Nomination
Committee. Each Committee Chair
reports to the Board on the activities
considered and determined by the relevant
Committee. A summary of the Committees’
responsibilities and their work during the
year can be found in the reports from the
Committees appearing later in this section.
The Committees are entitled to engage
specific advisors as required to discharge
their duties.

human resources are in place to support
implementation of the strategy;

• maintaining the policy and decision-
making process through which the
strategy is implemented;

• providing entrepreneurial leadership

within a framework of good governance
and risk management;

• monitoring performance against key
financial and non-financial indicators;

•

responsibility for risk management and
systems of internal control; and

• setting values and standards in
corporate governance matters.

Division of Responsibilities
The responsibilities of both the Chairman
and CEO are clearly defined and
understood:

• The Non-Executive Chairman, Andrew
Jones, has primary responsibility
for leading the Board, facilitating the
effective contribution of all members
and ensuring that it operates effectively
in the interests of the shareholders. In
addition, he maintains a strong focus on
governance to ensure good practice is
embedded in the day to day operations
with good flows in communication
and reporting. He maintains a regular
dialogue with the CEO to ensure the
business receives the support from
the Board necessary to progress the
strategy. The Chairman also meets with
the Non-executive Directors as required.
Shareholders have an opportunity to
engage with the Chairman and the
Board at the Company’s AGM.

Board Activities
The Board held seven scheduled meetings
during the year at which it considered all
matters of a routine nature, structured
through clear agenda setting, written
reports and presentations from both
internal members of staff as well as
external advisors and consultants. In
addition, the Board held ad-hoc meetings if
required to deal with non-routine business.
All meetings of the Board were quorate.

Board support, meeting
management and attendance
The Board and its Committees meet
regularly on scheduled dates. In leading
and controlling the Company, the Directors
are expected to attend all meetings and
their attendance for the financial year
2022-23 is shown above.

The Company Secretary plays a vital role
in ensuring good governance, assisting
the Chairman. Procedures are in place for
distributing meeting agendas and reports
so that they are received in good time, with
the appropriate information. Ahead of each
Board meeting, the Directors each receive
reports which include updates on strategy,
finance, including management accounts,
operations, commercial activities, business
development, risk management, legal and
regulatory, people and infrastructure and
on investor relations.

The Directors may have access to
independent professional advice, where
needed, at the Company’s expense.

Board Effectiveness
The Board conducts an assessment
of effectiveness each year through a
questionnaire in a process led by the
Chairman. The questionnaire provides
Directors with the opportunity to express
their views on a variety of topics including
board leadership, effectiveness and
accountability. The detailed findings of
the evaluation are reviewed, and actions
generated. A summary of the key findings
of this year’s review are set out in the
Chairman’s introduction to governance. In
addition, the Chairman has regular one-to-
one meetings with Directors. In compliance
with the QCA Code, succession planning
was considered as part of the board
effectiveness process. The Board
appointed David Hallas as CEO with effect
from 1 April 2022. Appointments are made
based on required expertise to match the
needs of the business while bearing in mind
the need to introduce diversity into the
Board composition.

ECO Animal Health Group Plc Annual Report 2022/23Strategic Resources
The ELT includes representation from
a wide range of disciplines, each leader
identifies and manages the key resources
and relationships in their respective areas.

Ethical Behaviours
The Board ensures ethical values
and behaviours are recognised and
respected, promoting a strong culture
of supporting our core values. These
values are incorporated into our various
codes which are made available on the
Company Intranet and which the Board
regularly reviews and updates. These
codes include Employee code of conduct,
human resources policies, Anti Bribery
and Corruption, Modern Slavery policy,
Health and Safety policies and Social
Media policies.

Board Induction, Training and
Development
When appointed, new Directors are
provided with a full and tailored induction
in order to introduce them to the business
and management of the Group. Throughout
their tenure, Directors are given access
to the Group’s operations and personnel,
and receive updates on relevant issues
as appropriate, taking into account their
individual qualifications and experience.
This allows the Directors to function
effectively with appropriate knowledge of
the Group.

The Board is satisfied that each Director
has sufficient time to devote to discharging
his responsibilities as a Director of the
Company.

Re-election of Directors
All directors are put forward for re-election
on a three-year rotational basis as set
out in the articles of association of the
Company.

The composition of the board of the
directors in relation to diversity is set out in
the Nomination Committee Report.

Stakeholder engagement
The Board and its Committees recognise
their responsibilities to shareholders and
other stakeholders.

The Company communicates with
shareholders through the Annual Report
and Accounts, regulatory announcements,
the AGM as well as meetings with existing
or potential new shareholders.

Annual reports as well as other regulatory
announcements and related information
are all available on the Company’s website.
The Company’s brokers also publish
research from time to time.

A list of the Company’s significant
shareholders can be found in the
Directors’ Report and in the investor
section of the Company’s website which
is updated following formal notifications of
movements to the Company.

The Company maintains regular
communication and dialogue with
other stakeholders such as our people,
customers, suppliers and regulators to
understand their needs and concerns
and factors these requirements into its
decisions and activities.

Annual General Meeting
(“AGM”)
This year’s AGM will take place on Thursday
7 September 2023 at 2.30pm at The
Grange, 100 High Street, London, N14 6BN.
Details of the resolutions to be considered
at the AGM are contained in the Notice of
Annual General Meeting.

Voting Outcomes
The Company held its 2022 Annual General
Meeting on 26 September 2022 following
the financial year ended 31 March 2022. All
resolutions proposed to the meetings were
duly passed. There were no significant
objections.

Internal controls
There is a clearly defined delegation of
authority from the Board to the Executive
Leadership Team, with appropriate
reporting lines to individual Executive
Directors. There are procedures for
the authorisation of Research and
Development, capital expenditure and
other investments. Board review of
progress in these investment initiatives,
together with “milestone” achievement
assessment is a regular feature of the
Board agenda.

Internal controls are in place which are
intended to provide reasonable assurance
of the custodianship of assets, the
recognition and measurement of liabilities,
the maintenance of proper accounting
records and the reliability of financial
information used within the business.

The Group finance team manages the
financial reporting process to ensure
that there is appropriate control and

review of the financial information
including the production of timely financial
information for Board meetings as well
as for annual and half-yearly financial
reporting responsibilities. Group Finance
is supported by the operational finance
team throughout the Group, who have
responsibility and accountability for
providing information in compliance with
the policies, procedures and internal best
practices.

The Group has in place a suite of codes
and policies to promote good governance
principles and ensure strong internal
control processes throughout the Group.

These include an overall code of conduct,
and policies on anti-bribery and corruption,
fraud, modern slavery, share dealing in
ECO securities, the use of social media
and business travel arrangements. These
policies are communicated directly to
all personnel by email, are re-enforced
through periodic training and are available
on the Group’s intranet site.

Although the Board itself retains the
ultimate power and authority in relation
to decision making, the Audit Committee
meets at least three times a year with
external auditors to review specific
accounting, reporting and financial
control matters. The Committee also
reviews the interim and final accounts
and has primary responsibility for making
a recommendation on the appointment,
reappointment and removal of
external auditors.

The Committee reviewed the Internal
Audit provision in 2022 and concluded
that the Group would be better supported
by seeking external independent audit
provision for specific projects due to the
environment in which the Group operates.
The Internal Audit function was therefore
disbanded and the Group has adopted
an approach whereby specialist internal
audit work is undertaken by external
organisations, the scope and extent of
which is focused on both financial and non-
financial processes and controls within the
Group. Internal Audit work is determined
by a risk-based approach and the Audit
Committee is responsible for overseeing
the work and the implementation of
any recommendations.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Going concern
After making appropriate enquiries, the
Directors have, at the time of approving the
financial statements, formed a judgement
that there is a reasonable expectation that
the Company and Group have adequate
resources to continue in operational
existence for the foreseeable future. For
this reason, the Directors continue to adopt
the going concern basis in preparing the
financial statements.

This conclusion is based on a review of
the resources available to the Group,
taking account of the Group’s financial
projections together with available cash
and a committed borrowing facility.

In reaching this conclusion, the Board has
considered the magnitude of potential
impacts resulting from uncertain future
events or changes in conditions, the
likelihood of their occurrence and the likely
effectiveness of mitigating actions that the
Directors would consider undertaking.

Dr Andrew Jones
Non-Executive Chairman

9 July 2023

Section 172 Statement

Shareholder engagement this year
has been active. The top 10 investors
represent approximately 71% of the
Company shares and investor meetings,
investor calls together with regular trading
updates throughout the year assisted
with communication. The Company’s
stockbrokers provide feedback from
shareholders and this feedback is discussed
at the subsequent Board meeting.

The Group employed an average of
234 people during the financial year
ended 31 March 2023 (2022 – 221).
All company announcements were
simultaneously circulated to all personnel.
Communications of note during the year
included key new product announcements,
new colleagues and retirements, new
procedures and governance processes.
In addition, our people were invited to
technical webinars, Town Hall meetings,
product launch discussions and
presentations.

During the year an employee engagement
survey was conducted. This included
questions concerning the workplace
environment, structure, salary and benefits
and Group strategy. Key findings have been
addressed and working parties established
to develop solutions. It is intended that
the engagement survey will be an annual
process.

The Group is considering other ways
to reduce its environmental impact;
the Group’s business model (largely
outsourced manufacturing and research)
is low impact. The Group utilises electronic
communications and hybrid working
patterns which will continue to be exploited
further helping with the Group’s carbon
footprint. Further details are contained in
the ESG Report.

Under s172 of the Companies Act 2006,
Company Directors have a duty to act
in good faith that is likely to promote the
success of the Company. This duty is for
the benefit of the members as a whole,
having regard to the likely consequences
of decisions for the long- term. In addition,
the Directors’ duty must have regard to:

a. The interests of the Company’s

employees

b. The need to foster the company’s

business relationships with suppliers,
customers and others

c. The impact of the company’s operations
on the community and the environment

d. The desirability of the company
maintaining a reputation for high
standards of business conduct, and

e. The need to act fairly as between

members of the company.

The Group actively engages with its
stakeholders, taking account of and
responding to their interests. Included
within this active engagement are the
stakeholders referred to in (a) to (e) above,
regulatory bodies, taxation inspectorates,
industry bodies and other compliance
organisations.

As set out in the Corporate Governance
report, the Directors have met on several
occasions during the year ended 31 March
2023. Discussion topics at each meeting
included Research and Development,
health, safety and environment, investor
feedback, anonymous staff survey and
welfare concerns, customer and supplier
feedback, capital investment and tax policy.

The activities of the Company have been
described further in the various reports from
the Chairman, Chief Executive, Committee
Chairs and the ESG report. In each case
employee impact, supplier and customer
benefit and shareholder interests have
weighed upon decisions made.

ECO Animal Health Group Plc Annual Report 2022/23ESG Report

ECO is committed to embedding
sustainability into its business dealings at
the highest standards. ECO recognises
the value of incorporating the principles
of Environment, Social and Governance
(ESG) into everything we do and significant
progress was made in the area in 2022-
2023. As ESG is of key importance to the
Company, it is the responsibility of the Board
of Directors, working through the business
leadership team.

The Company completed a large project
over the past year in which a framework of
ESG metrics and targets was developed via
a 2-step process. A Benchmarking Exercise
in which the ESG disclosures of companies
in our sector demonstrating best-practice
were evaluated and used to inform the
development of ECO metrics and targets
by the leadership team that best reflect the
aspirations and uniqueness of the Company.

As a result of this project, the Company is
clear on what it aspires to achieve in each
area, can do and measure now and in the
future and what it will commit to in terms of
stretching and achievable targets.

ECO is committed to the United Nations
Sustainable Development Goals (SDGs) and
their role as a blueprint for sustainability. Our
aspiration is to contribute to the following six
SDGs which are aligned with our current and
future business and intentions.

ECO intends to continue
our focus on the
Environment and DEI
• We aim to be carbon neutral
by at least 2045. This will be
achieved by implementing a
variety of initiatives in the UK
and the wider global business.

• We aim to achieve excellence

in diversity, focusing on gender
parity and ethnic diversity that
reflects the regions in which
we work.

No Poverty. ECO focuses on economically important diseases of
pigs and poultry; by treating and controlling these diseases, animals
are healthier and grow more profitably, enhancing the incomes of their
keepers.

Zero Hunger. ECO improves the health of pigs and poultry, providing
healthy and nutritious meat and eggs to populations around the world.

Good Health and Wellbeing. ECO provides a challenging and safe
workplace to global staff, business growth to distributors, funds to
enable chosen charities to help those they support and profitable pig
and poultry production to producers, increasing their livelihoods and
nutrition.

Gender Equality. ECO is committed to gender parity for its workforce
and our chosen international charity promotes gender equality as part
of its work.

Decent work and economic growth. ECO staff experience work and
development opportunities, customers are supported with training and
knowledge to better their businesses and we develop upstream and
downstream partnerships and employment to suppliers and distributors.

Responsible Production and Consumption. Changes and
improvements made by our key supplier and in the UK Southgate
office have increased our sustainability.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23ESG Report (continued)

Our Commitment to
the Environment

We are committed to making a fair
contribution to reducing the potential
of our business operations on the
environment and have made significant
progress in this area in 2022-2023.

Southgate, UK: In the Company’s Head
Office (Southgate, London, UK), major
improvements to recycling of food and
non-perishable waste were made along
with the elimination of single-use plastics.
Recycled consumables in the kitchen
and bathrooms are now used exclusively
along with LED lights throughout the office.
Installation of a smart meter will enable
monitoring of real-time electricity use and
may identify opportunities for reduction.
Confidential paper was collected (721 kgs),
shredded and recycled at a paper mill for
re-use in the form of household paper,
writing paper, etc. by the company SDR
(Secure Data Recycling). Batteries, including
laptop batteries, are recycled. Company IT
equipment is revived and reused by ECO. If
this is not possible, it is donated to a British
company, Innovent Recycling, which collect
equipment and attempt refurbishment.
No ECO IT equipment was collected for
refurbishment or recycling in 2022-2023.
The Company intends to switch from the
current energy supplier (81% green) to a
100% green energy supplier in 2024 at the
end of the current contract.

Cars: Two electric cars were added to the
UK car fleet driven for company business,
making 8% of fleet electric. The Company
intention from 2023-2024 is that every
UK and European car renewal is carbon-
neutral or the employee is moved to a
salary swap scheme.

Energy Used for Offices and
Business Miles:
Manufacturing and Suppliers: During
2022-2023, ECO’s Chinese joint venture
‘ECO-Biok’ finished building and fitting out
their new plant and began manufacture
of finished goods to supply the Chinese
market. This new plant was built to the
latest standards and meets new Chinese
requirements including updated animal
medicine GMP regulations which came into
force in 2022.

Table 1: Office Energy Use

Southgate Office

New Malden Office

Japan

China

Brazil

2021-2022
(kWh)

25,501

11,759

2022-2023
(kWh)

CO2 equivalent
(tCO2e) 2022-2023

30,032

28,278

9.049

3,687

2,758

8.7

6.3

4.2

2.0

0.2

Table 2: Business Miles Driven (Company and Private Cars)

2021-2022
(tCO2e)

2022-2023
(tCO2e)

# cars driving
business mileage

tCO2e/Car

Japan

Brazil

Mexico

Europe

LATAM

SE ASIA

USA

11.3

42.7

0.03

11.3

14.2

35.4

1.0

14.0

1.4

1.6

0.0

2.3

1.8

3.9

0.5

2.3

0.2

ECO’s largest supplier is the manufacturer
of tylvalosin, the active pharmaceutical
ingredient (API) in Aivlosin®. From 2020-
2022, there was an almost 30% reduction
in energy consumption per RMB turnover
and from 2021-2022, a 9% reduction. The
target for 2023 is a further 3% reduction.
These reductions were driven by energy
conservation and emission reduction
measures including photovoltaic power
generation, a sewage biogas project and
energy-saving air compressors.

Operations: Baseline metrics for 2022-
2023 were collected for pallets/skids,
route and number of shipments from
the Company’s global contract facilities.
Baseline metrics for the use of HDPE
containers for ECO’s Ivermectin Injectable
formulation were also developed in
anticipation of the introduction of PET
containers which will reduce the amount
of plastic entering landfill. When the
same data are collected next year and
compared to these baselines, targets can
be developed.

Social – Our focus is on gender
parity and ethnic diversity
The first ECO Employee Engagement
Survey took place in 2022-2023; 78% of
respondents agreed or strongly agreed
that ECO is a good place to work and
the Company aims to increase this to
above 80% in 2023-2024. Engagement
Workshops were conducted to suggest
actions to improve the lowest-performing
areas by 5% in 2023-2024. Employee
turnover in 2022-2023 was 14% and the
retention rate was 86%.

ECO recognises the value of gender
diversity in business. The ratio of
women:men on the Board and ELT
increased in 2022-2023 compared to
last year. For the first time, the ratio of
women:men was determined for Managers
and Non-Managers. ECO has committed
to supporting an Employee Engagement
Group for Women and to improve gender
diversity across all regions, levels and
functions of the Company through a
combination of recruitment, retention and
training programmes.

ECO Animal Health Group Plc Annual Report 2022/23
Using this year’s DEI survey, ethnicity
information is presented below for
Managers and Non-Managers; other data
was excluded due to potential biases in the
response rate.

ECO supports two charities, SHIVIA and
SignPost, encouraging staff to donate to
them with the company matching individual
donations. In 2022-2023, £8,000 was
donated. A commitment has been made to
continued support of both charities next year.

Governance – Ongoing
commitment to very high
standards
We are committed to meeting high
standards of business governance and risk
management practices. This applies both
to our own operations and our business
partners. We have developed, and continue
to update, strategies and procedures
specific to our business for managing
the main risk categories identified by our
Board of Directors. The Board is and has
been tirelessly focused and committed
to improving Business Governance for
some time.

ECO has committed
to supporting an
Employee Engagement
Group for Women and
to improve gender
diversity across all
regions, levels and
functions of the
Company

Gender Ratios

20%

80%

20%

80%

38%

56%

62%

44%

Board

ELT

Managers

Non-Managers

Men

Women

Managers

Hispanic/
Latin American
White
Asian
Mixed Race
Arab
Black

15.38%
53.85%
30.77%
0%
0%
0%

Non-managers

Hispanic/
Latin American
White
Black
Asian
Mixed Race
Arab

7.14%
64.29%
4.76%
23.81%
0%
0%

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Audit Committee Report

for the year ended 31 March 2023

I am pleased to present the Audit
Committee’s (“the Committee”) annual report
on its activities for the period up to the review
of our 2023 Annual Report and Accounts.

This report is intended to explain how the
Committee has met its responsibilities and
report on the activities of the Committee
during the year. As Chair of the Committee
I would welcome questions from shareholders
on any of the Committee’s activities at our
AGM to be held on 7 September 2023.

Aims and objectives
The Committee monitors the integrity of
the Financial Statements of the Interim and
Annual Reports and formal announcements
relating to the Group’s financial performance,
including advising the Board that the Annual
Report taken as a whole is fair, balanced
and understandable. It reviews significant
financial reporting issues, key judgements
and accounting policies and disclosures in
financial reports, reviews the effectiveness of
the Group’s internal control procedures and
risk management systems and considers how
the Group’s internal audit requirements shall
be satisfied, making recommendations to the
Board. It reviews the independent auditor’s
audit strategy and implementation plan and
its findings in relation to the Annual Report
and Interim Financial Statements. It monitors
the relationship with the Group’s independent
auditor including the consideration of audit
fees and independence.

Members of the Committee have access
to the Company Secretary who attends
and minutes all meetings. To enable the
Committee to discharge its duties effectively,
the Company Secretary is responsible for
ensuring the Committee receives high-
quality, timely information. The Chairman of
the Committee works closely with the FD
and the finance team to ensure papers for
meetings are comprehensive and relevant.
When appropriate to do so, the Committee
seeks the support of external advisers and
consultants.

Membership of the Committee
During the year to 31 March 2023, the
Committee comprised Tracey James (Chair),
Dr Frank Armstrong, Dr Andrew Jones and
Tony Rawlinson (resigned 9 August 2022).

Appointments to the Committee are made by
the Board following recommendations from
the Nomination Committee. Only members
of the Committee have the right to attend
meetings. The Committee members have a
mix of knowledge and skills gained through
their experience of business, management
practices including risk, the industry sector
and the committee as a whole has recent
and relevant financial experience. The

Executive Directors are invited to attend
meetings, and other senior people will attend
as appropriate. The external auditor also
attends the meetings to discuss the planning
and conclusions of their work and meet with
the members of the Committee without any
members of the executive team present. The
Committee Chair also meets privately with
the senior statutory auditor, Christopher Cork,
outside of the Committee meetings.

Operation of the Committee
The Committee reviews and updates the
Terms of Reference regularly, to conform to
best practice, which are subject to approval
by the Board. The Terms of Reference are
available on the Group’s website as well
as in hard copy format from the Company
Secretary. Each year, the Committee works to
a planned programme of activities, which are
focused on key events in the annual financial
reporting cycle and other matters that are
considered in accordance with its Terms of
Reference.

It provides oversight and guidance to
contribute to the ongoing good governance
of the business, particularly by providing
assurance that shareholders’ interests are
being properly protected by appropriate
financial management, reporting and internal
controls. The Committee approves the terms
of all audit and non-audit services provided
by the Group’s Auditors to ensure audit
objectivity is maintained.

The main activities of the Committee during
the period since the last Report were as
follows:

• Reviewing the management and reporting

of financial matters including key
accounting policies.

• Reviewing the Annual Report and

Accounts and advising the Board on
whether, when take as a whole, it is
fair, balanced, and understandable and
provides shareholders with the information
necessary to assess the Group’s position
and performance, business model and
strategy.

• Considering the tendering process and

appointment of the new external auditors

• Overseeing the relationship with, and

the independence and objectivity of, the
external auditors.

• Setting policy in relation to the use of the
external auditors for non-audit services.

• Advising the Board on the Group’s appetite
for and tolerance of risk and the strategy in
relation to risk management and reviewing
any non-conformances with these.

• Reviewing the Group’s risk management
and internal control systems and their
effectiveness, including reviewing the
Delegated Authority framework

• Reviewing the Group’s procedures for

detecting fraud, bribery and corruption and
ensuring arrangements are adequate for
employees to raise concerns.

• Reviewing the findings of external audit
reviews and ensuring that they are
scrutinised and remediation plans are
implemented.

• Reviewing global compliance matters

throughout the year.

Internal Audit
The Committee reviewed the Internal Audit
provision in September 2022 and concluded
that the Group would be better supported by
seeking external independent audit provision
for specific projects given the environment
in which the Group operates. The Internal
Audit function was disbanded and the Group
has adopted an approach whereby specialist
internal audit work is undertaken by external
organisations, the scope and extent of which
is focused on both financial and non-financial
processes and controls within the Group.
Internal Audit work is determined by a
risk-based approach.

During the year internal audit carried out and
completed a review of GDPR. In addition,
a review of cyber security controls and
processes was carried out by a third party
firm. The Committee reviews the findings of
the reviews, ensuring findings are scrutinised
and remediation plans are in place.

Risk management and Internal
Controls
The Committee reviewed the Group’s
risk assurance framework in the year. The
responsibilities surrounding risk management
and internal control systems are designed to
meet the needs of the size and complexity
of the business. It takes into account the
applicable requirements of regulators in
the various markets in which the business
operates as well as the legal requirements of
being a UK company admitted to AIM. Internal
controls are designed to manage rather than
eliminate risk and provide reasonable but not
absolute assurance against material loss or
misstatement.

The key components of the current systems
of internal controls are:

• Clearly communicating Eco’s values and
strategy to ensure these are understood
and people know what is expected.

• Developing business and financial plans

that support the strategy.

ECO Animal Health Group Plc Annual Report 2022/23 • Reviewing policies and procedures to
ensure these remain fit for purpose.

• Strengthening controls and internal

processes.

• Regular reporting of actual performance
relative to goals, budgets and forecasts.

• Ensuring there is a structure of

accountability

• Training and monitoring

• Board-approved remediation activities
in response to internal control review
findings.

Whistleblowing
The Group has a Whistleblowing Policy and
procedures to help with the detection and
prevention of fraud. Published on the Group’s
Intranet, the Policy provides all employees
access to a confidential forum in which it is
possible to raise concerns about potential
and perceived improprieties. Provided it is
appropriate to do so, the process is managed
by the Company Secretary. The outcomes of
any investigations carried out in accordance
with the Policy is reported to the Committee.
There were no whistleblowing notifications or
events during the year ended 31 March 2023.

Fair, balanced and
understandable
The content and disclosures made in the
Annual Report are subject to a verification
exercise by management to ensure that
no statement is misleading in the form and
context in which it is included, no material
facts are omitted which may make any
statement of fact or opinion misleading, and
implications which might be reasonably drawn
from the statement are true. The Committee
was satisfied that it was appropriate for the
Board to approve the Financial Statements
and that the Annual Report taken as a whole
is fair, balanced and understandable such that
it allows shareholders to assess the Group’s
position and performance against the Group’s
strategy and business model.

Significant issues
The Committee reviewed the key judgements applied to a number of significant issues in the
preparation of the Financial Statements. The review included consideration of the following:

Issue

How the committee addresses

Revenue
Recognition and
discount accounting

Prior Year
Adjustment

Intangible assets
capitalised and
development
expenditure

Accounting for
and disclosure of
non‑underlying
items

Going Concern

The Group has well-developed accounting policies for revenue
recognition in compliance with IFRS15 as shown in Note 2 and 4 to
the Financial Statements. The Group has one main source of revenue
representing direct sales of animal pharmaceutical products into UK,
European and global markets. The Group recognises revenue at the
point its performance obligation is met, which may occur at different
points in the revenue cycle dependent on contractual terms and shipping
methods. Certain revenue arrangements include the offering of volume
and other discounts to customers.

The Committee receives reports from management and from the auditors
to evidence that the policies are complied with across the Group.

The Committee reviewed the accounting for share incentive awards
made to employees of subsidiary companies and concluded that
the previous approach to recording the transaction in the balance
sheet of the parent company should be by increasing the value of the
investment in subsidiary, rather than recording it as an intercompany
receivable. Accordingly, the prior year balance sheet of the Parent
company has been restated to show this presentation. There is no
impact or effect on the consolidated financial statements.

This adjustment is detailed in note 3 of the financial statements.

The Group’s accounting policy for intangible assets is included within
the accounting policies in note 2 and the components of intangible
assets are set out in note 12.

In practice, work that is undertaken to build towards regulatory
approval for a new treatment claim using Aivlosin, existing approved
vaccines or other technologies, or an approval for marketing existing
technologies or applications in a new geographical market can be
viewed as starting at the full development phase and are likely to meet
the capitalisation criteria whereas costs in relation to some of the
Group’s recently announced projects, on vaccine development, for
example, are likely to meet the capitalisation requirements once they
are approved internally to commence the full development phase,
subject to careful consideration of residual technical feasibility/risk.

Goodwill and intangible asset impairment calculations (including
assumptions about future performance of the Group) and sensitivities
are undertaken at least annually by management and reviewed by the
Board and the Committee.

The Committee also considered and agreed the appropriateness of
the sensitivity analysis disclosures.

The Committee considered the accounting for and disclosure of
non-underlying items (see note 6 to the Financial Statements).
The Committee reviewed with management and discussed the
accounting and disclosure with the Group’s auditors. The Committee
concluded it was content with the accounting for and disclosure of
non-underlying items.

The Group continues to prepare its Financial Statements on a going
concern basis, as set out in Note 2.1 to the Financial Statements
on page 50. Management produces working capital forecasts on a
regular basis. The Board reviews those forecasts, particularly ahead
of the publication of Interim and Annual results. The Board continues
to scrutinise the Group’s detailed economic forecasts to ensure
that all relevant events and conditions are being incorporated that
might affect both short, medium and long-term performance. Having
reviewed the forecasts as at the date of this Report, the Committee
concluded that it was appropriate for the Group to continue to prepare
its Financial Statements on a going concern basis.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23The Committee regularly reviews all fees
for non-audit work paid to the independent
auditor. Details of these fees can be found in
Note 6 to the Financial Statements. Non-audit
fees were £nil in 2023. The Committee
concluded that the level of non-audit fees,
which represent 0% of the audit fees for
the Group, did not have a negative impact
on Haysmacintyre’s independence. The
Committee will continue to keep the area of
non-audit work under close review, particularly
in the context of developing best practice on
auditors’ independence.

The Committee regulates the appointment of
former colleagues of the independent auditor
to positions in the Group. The independent
external auditor also operates procedures
designed to safeguard its objectivity and
independence. These include the periodic
rotation of the senior statutory auditor, use
of independent concurring partners, use of
a technical review panel (where appropriate)
and annual independence confirmations by all
our people.

The independent external auditor reports
to the Committee on matters including
independence and non-audit work on an
annual basis.

Tracey James
Audit Committee Chair

9 July 2023

Audit Committee Report (continued)

Shareholders’ attention is drawn to the
section titled ‘Auditor’s responsibilities for the
audit of the financial statements’ in the Report
from the independent auditor on pages 39 to
44, about specific areas as reported by the
independent auditor to provide its opinion on
the Financial Statements as a whole.

Independent auditor
The appointment of the independent
external auditor is approved by shareholders
annually. The independent auditor’s audit
of the Financial Statements is conducted
in accordance with International Standards
on Auditing (UK) (‘ISAs’), issued by the
Auditing Practices Board. There are no
contractual obligations that act to restrict the
Committee’s choice of external auditor.

In September 2022, the Board directed
the Committee to undertake a competitive
tender of the audit. In November 2022,
following detailed selection criteria, the Board
appointed Christopher Cork of Haysmacintyre
LLP as statutory Auditor to the Group.

The assessment of the effectiveness of
external auditors is an ongoing process
involving regular discussion with key
stakeholders within the Group, engagement
with and feedback from the external auditors
themselves, and consideration by the
committee of the performance of the external
auditors. Having considered the effectiveness
and performance of the independent auditor
for the financial year ended 31 March 2023,
the Committee recommended to the Board
the reappointment of Haysmacintyre LLP as
independent auditor of the Group for the next
financial year, which will be subject to approval
by the shareholders at the AGM to be held on
7 September 2023.

Independent auditor: services,
independence and fees
The independent auditor provides the
following deliverables as part of its statutory
audit services:

• A report to the Committee giving an
overview of the results, significant
contracts, estimates, judgements and
observations on the control environment

• An opinion on whether the Group and

Company Financial Statements are true
and fair

• An internal controls report to the

Committee, following its audit, highlighting
to management any areas of weakness or
concern highlighted through the course of
their external audit work

ECO Animal Health Group Plc Annual Report 2022/23Remuneration Committee Report

for the year ended 31 March 2023

On behalf of the Remuneration Committee,
I am pleased to introduce the Remuneration
Committee Report. As a company admitted
to AIM, we are guided by the QCA’s
Remuneration Committee Guide and, when
appropriate to do so, look to the UK Corporate
Governance Code and to investor guidelines
for best practice.

In this report we set out the Committee’s
responsibilities and report on the activities of
the Committee during the year. We are including
in this year’s report a Policy Table summarising
key elements of our Directors’ Remuneration
Policy. In addition, in line with good practice, we
will voluntarily be putting an advisory resolution
to approve this report to our 2023 AGM.

Membership of the Committee
The Remuneration Committee comprises
Dr Frank Armstrong (Chairman), Dr Andrew
Jones and Tracey James. Tony Rawlinson
resigned from the Committee on
9 August 2022.

Role of the Remuneration
Committee
On behalf of the Board, the Remuneration
Committee reviews and determines the pay,
benefits and other terms of service of the
Company’s Executive Directors (CEO and CFO)
and the ELT. The Committee also keeps under
review the broad compensation strategy with
respect to all other Company employees.

Remuneration Committee
actions in the year
During the course of the year, the main
activities of the Committee were:

• Approving annual bonus structure and
targets for the year to March 2023

• Determining the executive annual bonus
outcome for the year to March 2022

• Review of the 2022 Remuneration

Committee Report

• Considering changes to Executive salaries
at mid year in line with our normal cycle

• Considering the level and structure
of LTIP awards in the context of the
company’s dilution limits, including
communicating with the company’s major
shareholders in late 2022

• Approval of performance criteria for the

LTIP for Executive Directors and ELT of the
Group for FY 23

• Approval of grant of LTIP awards for the
Executive Directors and ELT in February
2022

• Approval of the grant of CSOP awards

across the company, with awards actually
made following the year end

Post year end, the committee has:

• Approving annual bonus structure and
targets for the year to March 2024

The terms of reference of the Committee are
set out on the Company’s website.

• Determining the executive annual bonus
outcome for the year to March 2023

• Review of the Remuneration Committee
Report in the Annual Report & Accounts
2023

Company performance during
the year
The Group’s financial performance in the
year ended 31 March 2023 exceeded market
expectations from a revenue, profitability
and cash perspective, but in certain respects
did not exceed internal targets. Executive
bonuses have been assessed accordingly.

Remuneration Policy
The Company’s remuneration structure has
been designed to bring the Company into
line with best remuneration practice and to
improve the alignment of senior leadership
with shareholder interests, thereby supporting
future value creation. The Committee’s aim,
as in previous years, is that the rewards
that can be earned provide a competitive
level of incentive and are appropriate for a
Company of comparable size and complexity
at each level of performance. To this end, the
Committee considers appropriate goals from
time to time which it believes will best ensure
delivery of the Company’s short and long
term objectives and ensure alignment with
stakeholder interests.

Policy table

Element

Base Salary

Link to remuneration policy/
strategy

To help recruit and retain
high performing Executive
Directors.

Reflects the individual’s
experience, role and
importance to the business.

Benefits

Pension

To help recruit and retain
high performing Executive
Directors.

To provide market competitive
benefits.

To help recruit and retain
high performing Executive
Directors.

To provide market competitive
pensions.

Operation

Maximum opportunity

Performance metric

Base salary is reviewed
annually with any changes
effective 1 October with
reference to each Executive
Director’s performance
and contribution, company
performance, the scope
of the Executive Directors’
responsibilities and
consideration of competitive
pressures.

Executive directors benefit
from private medical,
permanent health insurance
and life assurance cover.

Employer’s pension
contribution.

The Committee is guided by
the general increase for the
broader employee population
but has discretion to decide on
a lower or a higher increase.

The Committee considers
individual and Company
performance when setting
base salary.

N/a

Maximum benefit applies
according to the underlying
insurance policy and is four
times base salary in the case of
life assurance.

The Company may contribute
up to 10% of base salary in the
case of CFO

None

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Remuneration Committee Report (continued)

Performance criteria and
weightings may be changed
from year to year.

At present, the performance
targets are based on EBITDA,
ROCE and personal targets.

Performance criteria and
weightings may be changed
from year to year.

For awards made in FY23 75%
of the award was subject to an
absolute TSR target and 25%
subject to R&D based targets.

Element

Link to remuneration policy/
strategy

Annual Bonus
Plan

To incentivise and reward
performance.

To align the interests of the
Executives and shareholders in
the short and medium term.

Operation

Maximum opportunity

Performance metric

The maximum bonus
opportunity for the CEO and
CFO is 100% of base salary
with target set at 60%.

Performance measures may
include financial, non-financial,
personal and strategic
objectives.

The Annual Bonus is earned by
the achievement of one-year
performance targets set by
the Remuneration Committee.
The parameters, performance
criteria, weightings and targets
are ordinarily set at the start of
each financial year.

33% of awards to Executives
under the Annual Bonus
plan are deferred into shares
vesting after 3years under the
deferred bonus plan.

Awards are subject to malus
and clawback provisions.

Long Term
Incentive Plan
(LTIP)

To incentivise and reward
long-term performance and
value creation.

To align the interests of
Executive Directors and
shareholders in the long-term.

Executive Directors are eligible
to receive awards under the
LTIP at the discretion of the
Committee.

In accordance with the scheme
rules the maximum award in
any financial year is 100% of
base salary.

Awards in FY23 were set at
35% of base salary.

Awards are granted as nil-
cost options or conditional
awards which vest after three
years subject to the meeting
of objective performance
conditions specified at award.

Awards are subject to malus
and clawback provisions.

All employee
share plan

To encourage all employees to
make a long-term investment
in the Company’s shares in a
tax efficient way

The Executive Directors may
participate in the CSOP on the
same terms as other eligible
employees.

The maximum participation
level will be aligned to HMRC
limits. To date, Executive
Directors have not received
CSOP awards.

Shareholding
requirement

Encourages Executive
Directors to achieve the
Company’s long- term strategy
and create sustainable
stakeholder value

Aligns with shareholder
interests

125% for the CEO and 100%
for the FD.

n/a

This percentage is 18% and
98% respectively at 30 June
2023

Non‑executive
Director
remuneration

To provide fees appropriate
to time commitments and
responsibilities of each role.

Non-executive Directors are
paid a base fee in cash. Fees
are reviewed periodically. In
addition, reasonable business
expenses may be reimbursed.

The Group Board is guided by
the general increase for the
broader employee population
and takes into account relevant
market movements.

None

n/a

From 1 April 2021, the share-based incentive
arrangements for the ELT and Executive
Directors has comprised awards from the
new LTIP and to members staff of market
priced share options from the Company’s
established Share Option Scheme.

event that their workloads are significantly
in excess of their contractual obligations.
The Chairman’s remuneration is determined
by Remuneration Committee in conjunction
with the CEO. However, the Chairman is not
entitled to vote on the matter.

Other Information
Remuneration of the Non-Executive Directors
is determined by the Chairman and the CEO.
They may be paid additional fees in the

The Executive Directors are employed under
rolling service contracts which may be
terminated by the Company or the individual
giving 12 months’ notice. Non-Executive
Directors are retained under Letters of

Appointment which may be terminated by
either the Company or the individual giving
3 months’ notice, or immediately in the
event that the director is not re-elected by
shareholders at an AGM.

The Executive Directors’ service agreements
and the Non-Executive Directors’
appointment letters are available for
inspection by shareholders at the Company’s
registered office and at the Company’s AGM.

ECO Animal Health Group Plc Annual Report 2022/23Remuneration during the year ended 31 March 2023
Directors’ remuneration
The aggregate remuneration payable to the Directors in respect of the period was as follows:

Salary

Other

Pension

Bonus

Remuneration

Payments

Total

Share based

2023

2022

2023

2022

2023

2022

2023

2022

2023

2022

2023

2022

2023

2022

£000's

D. Hallas

C. Wilks

A. Jones

A. Rawlinson

F. Armstrong

T. James

324

250

49
592

240

1661

491

332

276

497

396

323

1. This includes an amount of £85,000 in respect of a joining bonus

2. This includes an amount of £10,000 (2022: Nil) in respect of additional work undertaken to support the audit for the year ended 31 March 2022

Salaries
For FY23, the salary of the Chief Executive
Officer was £315,000 and the salary of the
Chief Financial Officer was £243,146. All UK
based staff and Directors received a 5%
increase in salary on 1 October 2022.

Annual bonus
The Committee considered the performance
of the Executive Directors in the financial
year against the criteria of the Annual Bonus
Scheme that comprised a 70% element of
basic salary based on financial performance
and 30% of basic salary on performance
against personal objectives.

In the financial year the Company
underperformed against the financial goals
set out in the Annual Bonus Scheme and this
was reflected by the Remuneration Committee
in the Executive’s bonus award. The Chief
Executive Officer received a bonus upon
commencement of his service – this was to
compensate him for share incentives which
were abandoned in his previous employment.

In accordance with the Annual Bonus one third
of the bonus amount set out above in respect
of David Hallas and Christopher Wilks for the
period will be settled in an award of nominal
price shares, as specified in the Policy Table.

Long term incentives
The Company made awards under its LTIP
to Executive Directors and ELT members
on 24 February 2023 subject to three year
performance targets for absolute Total
Shareholder Return (“TSR”) and Research &
Development (“R&D”). 75% of the award vests
based on achievement of the TSR objectives
and 25% of the award vests based upon
achievement of the R&D targets.

Details of awards held by Executive Directors under the LTIP and awards under the Deferred
Bonus Plan at 31 March 2022 and 31 March 2023 are set out below:

No of
awards
as at
31 March
2022

Date of
grant

Number
of awards
granted in
year

Price at
date
of grant
(£)

Normal
vesting date

No of
awards
held as at
31 March
2023

LTIP

David Hallas

24-Feb-23

117,313

1.275

24-Feb-26

117,313

Christopher
Wilks

Deferred
bonus

Christopher
Wilks

28-Apr-21

64,824

3.625

28-Apr-24

155,199

24-Feb-23

90,375

1.275

24-Feb-26

24-Sep-21

14,782

3.22

24-Sep-24

19,091

12-Dec-22

4,309

1.165

12-Dec-25

Total awards granted within the last 10 years which have been exercised for new shares or
remain outstanding are within the conventional UK dilution limit of 10%. The Company is
committed to operating within this limit.

Directors’ interests
Directors’ Shareholdings as at 31 March 2023 were as follows:

David Hallas

Christopher Wilks

Andrew Jones

Frank Armstrong

Tracey James

Number of
shares

53,394

Cost of
shares

58,596

159,095

249,371

16,449

32,249

3,000

5,000

9,720

4,500

% of issued
shares

0.08%

0.23%

0.02%

0.00%

0.01%

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Remuneration Committee Report (continued)

Annual General Meeting
Following consideration of governance
good practice, the Committee will voluntarily
put a separate advisory resolution on its
remuneration report to its 2023 AGM.

Dr Frank M Armstrong
Remuneration Committee Chairman

9 July 2023

Remuneration for Year ending
31 March 2024
Executive remuneration will be operated
under the policy detailed above.

Salaries and fees
Executive salaries and Non-Executive Director
fees will be reviewed during the year with any
changes effective 1 October 2023.

Annual bonus plan
The Annual Bonus Plan applies to both
executive directors and the ELT. Performance
targets for 2023/24 are split as to 70%
linked to Revenue and EBITDA performance,
30% linked to achievement of personal
targets set by the Remuneration committee.
The proposed personal objectives for the
CEO and CFO for 2023/24 are focused
around business performance and projects,
growth and corporate governance.

Long term incentives
The Committee intends to make LTIP awards
to its Executive Directors and ELT members
during FY23. These will operate in line with the
company’s policy.

ECO Animal Health Group Plc Annual Report 2022/23Nomination Committee Report

for the year ended 31 March 2023

Activities during the year
The Committee met twice during the year.

The Committee considered the composition
and experience among the Non-Executive
Directors and identified that it would be
valuable to add to the existing animal health
sector expertise currently in the team. It was
decided to address this need by recruitment
in the medium term.

During the year Tony Rawlinson decided,
after 7 years as a Non-Executive Director,
to step down from the Board of Directors.
The Committee and Board decided the
remaining Non-Executive team was able to
fully support the needs of business for the
remainder of the financial year and to defer
the process to seek a replacement in the new
financial year.

The Committee also reviewed in detail the
succession and development plans for the
Executive Directors and members of the
Executive Leadership Team.

The Committee and Board recognise the
importance and benefits of diversity and will
continue to look for ways to build on current
foundations.

Dr Andrew Jones
Nomination Committee Chairman

9 July 2023

Membership of the Committee
The Nomination Committee comprises
Dr Andrew Jones (Chairman), Dr Frank
Armstrong, Tracey James, Tony Rawlinson
(resigned 9 August 2022) and David Hallas.

Main responsibilities
The terms of reference of the Committee are
set out on the Company’s website. The main
responsibilities of the Committee are as
follows:

• Regularly reviewing the structure, size
and composition (including the skills,
knowledge, experience and diversity) of
the Board.

• Giving full consideration to succession

planning.

• Keeping under review the leadership

needs of the organisation.

• Being responsible for identifying and

nominating for the approval of the Board,
candidates to fill Board vacancies as and
when they arise.

• Reviewing the results of the Board

performance evaluation process that
relate to the composition of the Board.

• Formulating plans for succession for both
Executive and Non-Executive Directors.

• Nominating membership of the Audit and

Remuneration Committees.

• The re-election by shareholders of

Directors under the annual re-election
provisions and of the retirement by
rotation provisions in the Company’s
Articles of Association.

• Any matters relating to the continuation in
office of any Director at any time including
the appointment or removal of any
Director to Executive or other office.

Before any appointment is made by the
Board, the Nomination Committee evaluates
the balance of skills, knowledge, experience
and diversity on the Board, and, in the light of
this evaluation, prepares a description of the
role and capabilities required for a particular
appointment.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Directors’ Report

for the year ended 31 March 2023

The Directors present their report and
financial statements for the year ended
31 March 2023.

Directors
The following Directors have held office since
1 April 2022:

Andrew Jones

Non-Executive
Chairman

Anthony Rawlinson
(resigned 9 August
2022)

Non-Executive Director

Frank Armstrong

Non-Executive Director

Tracey James

Non-Executive Director

David Hallas

Chief Executive Officer

Christopher Wilks Chief Financial Officer

Principal activities
The principal activities of the Group in the year
under review were those of manufacturers
and suppliers of animal health products.
These activities were conducted on a global
scale, through a network including both
regional offices, (notably in Shanghai and
Princeton) and overseas subsidiaries.

Results and dividends
The consolidated income statement for the
year is set out on page 42.

The profit for the year after tax was £3.1m (2022:
loss of £0.7m). The Company does not propose
to pay a dividend for the year ended 31 March
2023 (year ended 31 March 2022 – nil).

Shareholder

Schroders

Soros Fund Management

P A Lawrence and Family

AXA SA

Chelverton Asset Management

Lombard Odier Asset Management

FIL Investment Management

abdrn plc

Sorbus Partners

Killik Asset Management

Artemis Investment Management

Grandeur Peak Global Advisors

Close Brothers Group

Future developments
The likely future development of the business
is covered in the Strategic Report.

Financial risk management
Information on the use of financial instruments
by the Group and its management of financial
risk is disclosed in note 32 to the financial
statements. Further details of the Group’s
financial risks and controls are set out in the
Strategic Report.

Energy and carbon emission
An analysis of energy consumption
and carbon emissions is included in the
Sustainability Report. The ECO Group in
the UK has an outsourced business model.
All warehouses and production facilities
are contracted to specialist regulated and
approved companies. As such the premises
occupied by ECO in the UK comprise two
offices. Consequently, the emissions from
ECO Group premises in the UK are disclosed
in the ESG report.

Post balance sheet events
Post balance sheet events are detailed in
note 33 to these financial statements.

Substantial shareholdings
At 31 May 2023 the Company had been
notified of the following holdings of 2% of
more of its issued share capital:

10,454,171

7,715,642

6,754,694

5,596,867

5,000,000

3,546,099

2,991,052

2,050,146

2,000,000

1,811,921

1,687,647

1,670,000

1,430,975

% of issued
share capital

15.44

11.39

9.97

8.26

7.38

5.24

4.42

3.03

2.95

2.68

2.49

2.47

2.11

Group research and
development activities
The Group is continually researching into
and developing new products and markets.
Details of expenditure incurred and written
off during the year are shown in the notes to
the financial statements. The Group remains
committed to obtaining further authorisations
of its Aivlosin® products in other key territories
and for additional disease applications, while
at the same time expanding its product
offering to include vaccines and other
biologicals relevant to the swine and poultry
markets.

Directors’ insurance
The Company maintains Directors’ and
Officers’ liability insurance for the benefit
of its Directors which remained in place at
31 March 2023 and throughout the preceding
year.

Financial instruments
The Group’s accounting policies for financial
instruments and strategy for management
of those financial instruments are given in
notes 2.6 and 32 to the financial statements
respectively.

Internal financial controls
The Board of Directors is responsible for the
Group’s system of internal financial control.
Internal control systems are designed to
meet the particular needs of the companies
concerned and the risks to which they are
exposed. This provides reasonable, but
not absolute, assurance against material
misstatement or loss. Strict financial and
other controls are exercised by the Group
over its subsidiary companies by day to
day supervision of the businesses by the
Directors.

Stockbrokers
Singer Capital Markets is the Group’s
nominated advisor and stockbroker and
Investec is the joint broker. The closing share
price on 31 March 2023 was 96.5p per share
(2022: 165p). During the year the average
share price was 111.24 p (2022: 272.4p).

Auditors
The auditors Haysmacintyre LLP are
being proposed for reappointment at the
forthcoming Annual General Meeting of the
Company.

ECO Animal Health Group Plc Annual Report 2022/23principal risks and uncertainties. The forward-
looking statements reflect the knowledge
and information available to the Company
and Group during preparation and up to the
publication of this document. By their very
nature, these statements depend upon
circumstances and relate to events that may
occur in the future and thereby involving a
degree of uncertainty. Therefore, nothing in
this document should be construed as a profit
forecast by the Company or Group.

On behalf of the Board.

Dr Andrew Jones
Chairman

9 July 2023

Statement of Directors’
responsibilities
The Directors are responsible for preparing
the Annual Report and the financial
statements in accordance with applicable
law and regulations. Company law requires
the Directors to prepare financial statements
for each financial year. Under that law the
Directors have prepared the Group and
Company financial statements in accordance
with UK adopted international financial
reporting standards. Under Company law
the Directors must not approve the financial
statements unless they are satisfied that they
give a true and fair view of the state of affairs
of the Group and the Company and of the
profit or loss of the Group for that period.

In preparing these financial statements, the
Directors are required to:

•

select suitable accounting policies and
then apply them consistently;

• make judgements and accounting
estimates that are reasonable;

•

state whether applicable UK-adopted
international accounting standards,
subject to any material departures
disclosed and explained in the financial
statements;

• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the Group
will continue in business.

The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Company’s
transactions and disclose with reasonable
accuracy at any time the financial position of
the Company and the Group. They are also
responsible for safeguarding the assets of the
Company and the Group and hence for taking
reasonable steps for the prevention and
detection of fraud and other irregularities.

The Directors are responsible for ensuring
the annual report and the financial statements
are made available on a website. Financial
statements are published on the Company’s
website in accordance with legislation in the
United Kingdom governing the preparation
and dissemination of financial statements,
which may vary from legislation in other
jurisdictions. The maintenance and integrity
of the Company’s website is the responsibility
of the directors. The directors’ responsibility
also extends to the ongoing integrity of the
financial statements contained therein.

Statement of disclosure to
auditors
So far as each of the Directors at the date of
approval of this report are aware:

(a) there is no relevant audit information

of which the Group and the Company’s
auditors are unaware; and

(b) they have taken all the steps that they

ought to have taken as Directors in order
to make themselves aware of any relevant
audit information and to establish that the
Group and the Company’s auditors are
aware of that information.

Parent Company Guarantee
ECO Animal Health Group PLC has given
statutory guarantees against all the
outstanding liabilities of ECO Animal Health
Ltd, thereby allowing its subsidiary to be
exempt from the annual audit requirement
under Section 479A of the Companies Act,
for the year ended 31 March 2023.

Cautionary statement and
Forward‑Looking Statements
Under the Companies Act 2006, a company’s
Directors’ Report is required, among other
matters, to contain a fair review by the
Directors of the Group’s business through
a balanced and comprehensive analysis of
the development and performance of the
business of the Group and the position of the
Group at the year end, consistent with the size
and complexity of the business.

The Directors’ Report set out above, including
the Chair’s Statement, the Chief Executive’s
Review and the Finance Director’s Report
incorporated into it by reference, has been
prepared only for the shareholders of the
Company as a whole, and its sole purpose and
use is to assist shareholders to exercise their
governance rights. In particular, the Directors’
Report has not been audited or otherwise
independently verified. The Company and its
Directors and colleagues are not responsible
for any other purpose or use or to any other
person in relation to the Directors’ Report.

The Directors’ Report contains indications of
likely future developments and other forward-
looking statements that are subject to risk
factors associated with, among other things,
the economic and business circumstances
occurring from time to time in the countries,
sectors and business segments in which the
Group operates. These factors include, but
are not limited to, those discussed under

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Independent Auditor’s Report to the Members of
Eco Animal Health Group Plc

for the year ended 31 March 2023

Opinion
We have audited the financial statements
of ECO Animal Health Group Plc (the
‘Company’) and its subsidiaries (together
the ‘Group’) for the year ended 31 March
2023 which comprise the Consolidated
Income Statement, Consolidated Statement
of Comprehensive Income, Consolidated
Statement of Changes in Equity, Statement of
Changes in Equity, Consolidated Statement
of Financial Position, Statements of Financial
Position, Consolidated Cash Flow Statement,
Statements of Cash Flows and notes to the
financial statements, including a summary of
significant accounting policies. The financial
reporting framework that has been applied
in their preparation is applicable law and UK
adopted international accounting standards.

In our opinion, the financial statements:

• give a true and fair view of the state of the
Parent Company’s and Group’s affairs as
at 31 March 2023 and of the Group’s profit
for the year then ended;

• have been properly prepared in

accordance with UK adopted international
accounting standards; and

• have been prepared in accordance with
the requirements of the Companies Act
2006.

Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities
under those standards are further described
in the Auditor’s responsibilities for the audit
of the financial statements section of our
report. We are independent of the Group in
accordance with the ethical requirements
that are relevant to our audit of the financial
statements in the UK, including the FRC’s
Ethical Standard as applied to listed entities,
and we have fulfilled our other ethical
responsibilities in accordance with these
requirements. We believe that the audit
evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.

An overview of the scope of
our audit
Our audit scope covered all the Group’s
components with varying levels of
testing based on the significance of each
component. We performed a scoping
assessment of the Group at the planning
stage of the audit and subsequently updated
this assessment for the year-end figures. We
assessed the risk of material misstatement for
each of these components and determined
their significance based on the overall impact
to the Group financial statements. Our
assessment incorporated a consideration of

the significance of revenue, expenditure and
balances in the context of the group financial
statements group materiality. We also
assessed each entity in relation to the risk of
management override of controls.

At March 2023, the Parent Company, Eco
Animal Health Limited, the sub-Group in China,
the Brazil trading entity and the Pharmgate
Animal Health LLC US joint operation were
considered by us to constitute significant
components of the Group. The audits of all
entities other than the sub-Group in China
were carried out by the Group audit team
for the purposes of this opinion. The audits
of the sub-Group in China which represents
Zheijang Eco Biok Animal Health Products,
Shanghai Eco Biok Animal Health Products
and Zheijang ECO Animal Health Company
Limited have all been audited to component
materiality by LehmanBrown (Beijing) CPAs
under instruction from and supervision by
Haysmacintyre LLP as the Group auditor.

The remaining entities were deemed
insignificant to the Group based on the above
metrics and therefore the audit work on these
components has been limited to analytical
review, specific cut-off testing, attendance of
stock count at year-end as well as verification
of bank balances to third-party confirmation,
where considered appropriate. This work has
been performed by the Group audit team.

Our group audit scoping ensures we have
attained coverage through full-scope and
specified audit procedures of 91% of group
revenues, 97% of group profit before tax and
99% of group total assets. The remaining
balances were tested analytically using
group materiality. The work performed was
to the materiality levels set out below, with
component materiality levels adopted for the
relevant subsidiary entities depending on the
level of work to be performed as a result of
our scoping assessment.

We communicated with both the Directors
and the Audit Committee our planned audit
work via our audit planning report and relevant
discussion.

We communicated audit progress with
the Audit Committee through interim audit
progress meetings. We have communicated
any issues to the Audit Committee and the
Directors in our final audit findings report.

Our involvement with the
component auditor
Where work has been performed by the
component auditor, we have been involved
at all stages of the component audit to
ensure in our role as Group auditor the work
completed was sufficient to provide us with
sufficient and appropriate audit evidence to
allow us to form our basis for our opinion on

the Group financial statements as a whole.
Our involvement with the component auditor
consisted of, but was not limited to the
following procedures:

• Arrangement of an audit planning meeting

with ourselves and the component
auditors.

• An assessment of the internal policies and
procedures of the component auditor to
ensure that the audit methodology was
appropriate and of consistent quality with
our own.

• Planning communications outlining the

key audit risks with the component auditor
to ensure that their focus was applied to
the key risk areas outlined by ourselves as
Group auditor.

• We completed a remote review of the
audit files prepared by the component
auditors and a review of the appendices
and internal reporting memos provided to
us by the component auditors.

Throughout the audit process the Group audit
team remained in contact with the component
auditors to discuss progress, findings and
discuss further audit work to be performed in
order to complete the work on the Chinese
entities to an appropriate standard.

Conclusions relating to going
concern
In auditing the financial statements, we have
concluded that the Directors’ use of the
going concern basis of accounting in the
preparation of the financial statements is
appropriate.

Our evaluation of the Directors’ assessment
of the Group’s ability to continue to adopt the
going concern basis of accounting included
consideration of the inherent risks to the
Group’s business model and analysed how
those risks might affect the Group’s financial
resources or ability to continue operations
over the period 12 months from the date of
the signing of the financial statements.

The risks that we considered most likely to
affect the Group’s financial resources or
ability to continue operations over this period
were adverse circumstances impacting
timely conversion of trade receivables to
cash, growth in revenues, adverse changes
in working capital trends and significant
difficulties in relation to accessing overseas
cash. The performance of the overseas
markets is significant to the Group model
and therefore through our review we have
considered any downturn in performance in
these markets.

ECO Animal Health Group Plc Annual Report 2022/23We considered these risks through a review
of the application of reasonably foreseeable
downside scenarios that could arise with
reference to the level of available financial
resources indicated by the Group’s financial
forecasts and management’s assessment
of these risks, including potential mitigations
available. This has been aligned with
our review of the development of future
products and the assessments performed
by management in determining the market
opportunities that they look to exploit.

Our audit procedures to evaluate the director’s
assessment of the Group and the parent
company’s ability to continue to adopt the
going concern basis of accounting included:

• Undertaking an initial assessment at the
planning stage of the audit to identify
events or conditions that may cast
significant doubt on the Group and the
Company’s ability to continue as a going
concern;

• Evaluating the methodology used by the
directors to assess the Group and the
Company’s ability to continue as a going
concern;

• Reviewing the directors’ going concern
assessment and evaluating the key
assumptions used and judgements applied;

• Reviewing the liquidity headroom and

applying a number of sensitivities to the
base forecast assessment of the directors
to ensure there was sufficient headroom
to adopt the going concern basis of
accounting; and

• Reviewing the appropriateness of the
directors’ disclosures regarding going
concern in the financial statements.

Based on the work we have performed, we
have not identified any material uncertainties
relating to events or conditions that,
individually or collectively, may cast significant
doubt on the Group and the Company’s ability
to continue as a going concern for a period of
at least twelve months from when the financial
statements are authorised for issue.

Our responsibilities and the responsibilities of
the Directors with respect to going concern
are described in the relevant sections of this
report.

Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on; the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement
team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.

Key Audit Matter

Revenue recognition

The Group’s revenue recognition policy is
included within the accounting policies in
note 2 and the components of revenue are set
out in note 4.

The Group recognises revenue in respect of
the sale of Aivlosin and Vaccine products in the
UK, European and Global markets. The Group
recognises revenue in line with delivery terms
per customer and therefore at the point in
which their obligation is satisfied in transferring
control of the product over to its customer.

As a result of revenue relating to product sales
only, there is a risk that it has been materially
misstated as a result of fraud or error through
the recognition of revenue related to sales that
occurred around year-end and the incorrect
application of delivery terms in relation to the
revenue being recognised.

How our scope addressed this matter

In response to this risk our work consisted of but was not limited to the following audit procedures:

• Assessed the Group’s accounting policy for each material revenue stream and performed

walkthrough procedures to assess the design and implementation of controls.

• Evaluated management review controls in respect of revenue recognition.

• We performed substantive testing in year on sales at a lower risk rating as documented in our
audit planning report. We documented the business processes in place for the recording of a
sale in the ledger for both the UK and significant overseas operations.

• Our review also included an assessment of the appropriateness of the recognition of trade

receivables, accrued income and deferred income.

• We obtained details of all the relevant delivery terms applicable to the Group and performed
walkthrough tests of each determining whether these had been appropriately applied in
recognising revenue in the financial statements.

• We performed specific targeted testing around year-end, with March 2023 and April 2023

sales listings reviewed and delivery terms obtained for a selection of significant transactions.
We agreed sales to supporting documentation and recorded the delivery terms for each
item. The application of delivery terms was then reviewed to ensure revenue was being
recognised as expected.

Based on the assessment and given the significant coverage of testing over Group revenue, we
found no evidence to suggest that revenue was not being recognised in accordance with the
Group’s revenue recognition accounting policy. We found that the application of this policy in line
with contractual delivery terms was as expected particularly around year-end.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Independent Auditor’s Report to the Members of Eco Animal Health Group Plc (continued)

Key Audit Matter

How our scope addressed this matter

Recoverability of capitalised development
costs and application of IAS38

In response to this risk our work consisted of but was not limited to the following audit
procedures:

• We obtained and reviewed the Group research and development policy and critically

assessed the application of the policy in line with the IAS38 requirements.

• We obtained the intangible fixed asset register and verified the brought forward figures to the

prior year signed financial statements.

• For a sample of previously capitalised intangibles, we obtained supporting documentation
to ensure there were no indications that these projects should no longer be capitalised as
intangible assets. We also ensured that sales related to these historically capitalised projects
were taking place evidencing that they remained viable in the market.

• For the development projects ongoing in the year, we obtained management’s assessment
and obtained supporting evidence where possible to ensure that the treatment of these
costs as development costs were appropriate and in line with IAS 38 criteria.

• We tested a sample of capitalised additions to supporting documentation and to the specific
study that this related to so that we could understand the work being performed and assess
whether it satisfied the development costs criteria.

• We discussed these projects with the Group’s internal research and development team

as well as an external expert engaged by the Group who specifically assessed the studies
included in the additions sample. We performed our own review of the expert provided by the
Group to ensure that their assessment was reasonable and that the expert was reliable.

• We obtained management’s impairment assessment and critically analysed the inputs in the
model and the forecasts for future revenues of the projects in development. We challenged
assumptions made by management in relation to the forecasts. This included comparing
historic forecasts against actuals to determine their accuracy’ as well as performing stress
tests on future forecasts to determine the impact.

• We reviewed the amortisation policy as disclosed in the notes and performed our own

recalculation to ensure correctly calculated.

Based on the above assessment, we found no evidence to suggest that development costs
were materially overstated in the financial statements. We found that the application of the
policy was in line with IAS 38 requirements and there was no evidence of any impairment of the
capitalised development costs.

In response to this risk our work consisted of but was not limited to the following audit
procedures:

• We obtained management’s assessment of the cash generating unit’s (“CGUs”) to which

goodwill has been allocated to ensure this was appropriate.

• We obtained management’s impairment assessment of goodwill and assessed the

cashflows included in the impairment review to ensure these were in line with the guidance
provided by IAS 36.

• We reviewed and scrutinised the estimates and judgements made by management in

preparing the cashflow forecasts to ensure that these were reasonable.

•

In determining whether evidence of impairment exists, we performed sensitivity analysis on
the base case forecast prepared by management to determine the changes required in the
key estimates for the headroom to be nil.

• We ensured that the financial statements contained appropriate levels of disclosure to draw
attention to the key estimation uncertainty arising on the impairment review prepared for the
purposes of IAS 36.

Based on the above assessment, we found no evidence to suggest that goodwill was materially
impaired. We also noted that management’s impairment review was appropriate when
considering the stipulations of IAS 36.

The Group’s accounting policy for intangible
assets is included within the accounting
policies in note 2 and the components of
intangible assets are set out in note 12.

The Group have a specific policy in relation
to research and development which has
been prepared in accordance with IAS 38
requirements.

The net book value of capitalised
development costs is £17,477k at 31 March
2023 and therefore is a material balance
within the Group financial statements.

There is a risk that these intangible
assets are materially overstated, or that
insufficient impairment or amortisation has
been charged. Furthermore, there is a risk
that additions in the year are capitalised
incorrectly on the basis that the weight of
evidence does not suggest the project has
moved beyond the research stage.

Management impairment reviews are
areas that carry risks of error or fraud due
to the degree of estimation uncertainty
included in forecasting and discounting
future cash flows, due to the assumptions
made in relation to future market demand,
applicable discount rates and various other
macroeconomic inputs included in the
impairment model.

The impact of this is that the recoverable
amount of capitalised development costs
carry a high degree of estimation uncertainty
and a potential range of reasonable
outcomes greater than materiality for the
financial statements.

Recoverability of goodwill

The Group’s accounting policy for goodwill
is included within the accounting policies
in note 2 and the components of intangible
assets are set out in note 12.

The total goodwill balance as at 31
March 2023 is £17,930k. The goodwill is
primarily attributable to Eco Animal Health
Limited, which has a loss before tax for
the year ended 31 March 2023 of £357k.
Furthermore, this component has suffered
losses before tax in both FY21 and FY22.
These losses are indicators that the goodwill
attributable to the loss-making CGU may be
impaired.

There is a risk that goodwill attributable
to the historic acquisition of subsidiaries
(determined to be the appropriate CGUs for
goodwill allocation) is impaired.

ECO Animal Health Group Plc Annual Report 2022/23Our application of materiality
We apply the concept of materiality both in
planning and performing our audit, and in
evaluating the effect of misstatements on
our audit and on the financial statements.
For the purposes of determining whether the
financial statements are free from material
misstatement we define materiality as the
magnitude of misstatement that makes
it probable that the economic decisions
of a reasonably knowledgeable person,
relying on the financial statements, would
be changed, or influenced. We determined
overall materiality for the Group financial
statements as a whole to be £835,000 being
1% of revenue for the year. We considered
it appropriate to determine our materiality
based on revenue as we consider this to
be the key metric in assessing the financial
performance and position of the Group.
For each of the significant components as
documented above, we applied a specific
materiality for the review based on revenue
metrics. Our materiality for the parent
company was determined to be 95% of group
materiality which totalled £794,000. For those
components that were considered non-
significant, we performed analytical reviews
and specific testing to Group materiality.

We determined performance materiality
to be 75% for the Group and all significant
components with 75% based on our
assessment of the Group’s control
environment.. We evidenced effective
controls in place which mitigate the risk of
misstatement and have obtained evidence
to support their effectiveness through our
assessment of controls and walkthrough
procedures.

We agreed with the Audit Committee that
we would report to it all audit differences in
excess of £41,750 as well as differences
below that threshold that, in our view,
warranted reporting on qualitative grounds.
We also report to the Audit Committee on
disclosure matters that we identified when
assessing the overall presentation of the
financial statements.

Other information
The Directors are responsible for the other
information. The other information comprises
the information included in the annual report,
other than the financial statements and our
auditor’s report thereon. Our opinion on the
financial statements does not cover the
other information and, except to the extent
otherwise explicitly stated in our report, we do
not express any form of assurance conclusion
thereon.

In connection with our audit of the financial
statements, our responsibility is to read the
other information and, in doing so, consider

whether the other information is materially
inconsistent with the financial statements,
or our knowledge obtained in the audit or
otherwise appears to be materially misstated.
If we identify such material inconsistencies
or apparent material misstatements, we
are required to determine whether there
is a material misstatement in the financial
statements or a material misstatement of
the other information. If, based on the work
we have performed, we conclude that there
is a material misstatement of this other
information, we are required to report that
fact. We have nothing to report in this regard.

Matters on which we are
required to report by
exception
In the light of the knowledge and
understanding of the Group and its
environment obtained in the course of
the audit, we have not identified material
misstatements in the strategic report or the
Directors’ report.

We have nothing to report in respect of the
following matters in relation to which the
Companies Act 2006 requires us to report to
you if, in our opinion:

•

adequate accounting records have
not been kept by the Group, or returns
adequate for our audit have not been
received from branches not visited by us;
or

the Group financial statements are not in
agreement with the accounting records
and returns; or

• we have not received all the information
and explanations we require for our audit.

Responsibilities of directors
As explained more fully in the Directors’
responsibilities statement set out on
page 35, the Directors are responsible for the
preparation of the financial statements and
for being satisfied that they give a true and
fair view, and for such internal control as the
Directors determine is necessary to enable
the preparation of financial statements that
are free from material misstatement, whether
due to fraud or error.

In preparing the financial statements, the
Directors are responsible for assessing
the Group’s ability to continue as a going
concern, disclosing, as applicable, matters
related to going concern and using the going
concern basis of accounting unless the
Directors either intend to liquidate the Group
or to cease operations, or have no realistic
alternative but to do so.

Auditor’s responsibilities
for the audit of the financial
statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from material
misstatement, whether due to fraud or
error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance
is a high level of assurance but is not a
guarantee that an audit conducted in
accordance with ISAs (UK) will always detect
a material misstatement when it exists.
Misstatements can arise from fraud or error
and are considered material if, individually
or in the aggregate, they could reasonably
be expected to influence the economic
decisions of users taken on the basis of these
financial statements.

Irregularities, including fraud, are instances
of non-compliance with laws and regulations.
We design procedures in line with our
responsibilities, outlined above, to detect
material misstatements in respect of
irregularities, including fraud. The extent
to which our procedures are capable of
detecting irregularities, including fraud is
detailed below:

Explanation as to what extent
the audit was considered
capable of detecting
irregularities, including fraud
Based on our understanding of the Group
and industry, we considered the extent
to which non-compliance with laws and
regulations could have a material effect on the
financial statements. We also identified and
considered those laws and regulations that
have a direct impact on the preparation of the
financial statements such as the Companies
Act 2006, corporation tax, payroll tax and
sales tax.

We evaluated management’s incentives and
opportunities for fraudulent manipulation of
the financial statements (including the risk
of override of controls) and determined that
the principal risks were related to posting
inappropriate journal entries to revenue and
management bias in accounting estimates.
Audit procedures performed by the
engagement team included:

• We obtained an understanding of the

legal and regulatory frameworks that are
applicable to the Group and determined
that the most significant are the AIM
Rules, Companies Act 2006, relevant
pharmaceutical regulations, corporation
tax, payroll tax and sales tax;

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Independent Auditor’s Report to the Members of Eco Animal Health Group Plc (continued)

Use of our report
This report is made solely to the company’s
members, as a body, in accordance with
Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken
so that we might state to the company’s
members those matters we are required
to state to them in an Auditor’s report and
for no other purpose. To the fullest extent
permitted by law, we do not accept or assume
responsibility to anyone other than the
company and the company’s members as a
body, for our audit work, for this report, or for
the opinions we have formed.

Christopher Cork

(Senior Statutory Auditor)

For and on behalf of Haysmacintyre LLP,
Statutory Auditors

10 Queen Street Place
London
EC4R 1AG

• We obtained an understanding of how the
Group complies with these frameworks
through discussions with the Directors and
management;

• We inspected relevant tax filings and
considered these and other relevant
correspondence for indications of non-
compliance;

• We assessed the susceptibility of the

Parent Company’s and Group’s financial
statements to material misstatement
including how fraud might occur by
considering the key risks impacting the
financial statements;

• We carried out a review of manual
entries recorded in management’s
accounting records and assessed the
appropriateness of such entries;

• We challenged assumptions and

judgements made by management and
their critical accounting estimates;

• We assessed whether the Group’s control
environment is adequate for the size and
operating model of such a Group.

Because of the inherent limitations of an
audit, there is a risk that we will not detect
all irregularities, including those leading
to a material misstatement in the financial
statements or non-compliance with
regulation. This risk increases the more
that compliance with a law or regulation is
removed from the events and transactions
reflected in the financial statements, as we will
be less likely to become aware of instances
of non-compliance. The risk is also greater
regarding irregularities occurring due to fraud
rather than error, as fraud involves intentional
concealment, forgery, collusion, omission or
misrepresentation.

A further description of our responsibilities for
the audit of the financial statements is located
on the Financial Reporting Council’s website
at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s
report.

ECO Animal Health Group Plc Annual Report 2022/23

Financial
Statements

In this section

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated Statement of Changes in Equity

Statement of Changes In Equity

Statements of Financial Position

Statements of Cash Flows

Notes to the Consolidated Financial Statements

ECO Animal Health Group Plc Annual Report 2022/23

41
41

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Consolidated Income Statement

for the year ended 31 March 2023

Revenue

Cost of sales

Gross profit

Other income

Research and development expenses

Administrative expenses

Impairment of intangible assets

Profit from operating activities

Finance income

Finance costs

Net finance cost

Share of profit of associate

Profit before income tax

Income tax charge

Profit/(loss) for the year

Profit/(loss) attributable to:

Owners of the parent Company

Non-controlling interest

Profit/(loss) for the year

Earnings per share (pence)

Diluted earnings per share (pence)

Adjusted EBITDA (Non-GAAP measure)

The notes on pages 50 to 92 form part of these financial statements.

Notes

2023
£000’s

85,311

(46,935)

38,376

45.0%

357

(5,920)

(27,866)

4,947

104

(656)

(552)

4,440

(1,349)

3,091

1,008

2,083

3,091

1.49

1.47

7,235

2022
£000’s

82,195

(47,059)

35,136

42.7%

(7,621)

(24,055)

(2,085)

1,440

190

(284)

(94)

1,389

(2,094)

(705)

(686)

(19)

(705)

(1.01)

5,406

ECO Animal Health Group Plc Annual Report 2022/23Consolidated Statement of Comprehensive Income

for the year ended 31 March 2023

Profit for the year

Other comprehensive income/(losses):

Items that may be reclassified to profit or loss:

Foreign currency translation differences

Items that will not be reclassified to profit or loss:

Deferred tax on property revaluations

Remeasurement of defined benefit pension schemes

Other comprehensive income/(losses) for the year

Total comprehensive income for the year

Attributable to:

Owners of the parent Company

Non-controlling interest

The notes on pages 50 to 92 form part of these financial statements.

Notes

2023
£000’s

3,091

2022
£000’s

(705)

(586)

2,195

100

(486)

2,220

2,605

1,515

798

1,807

2,605

435

1,080

1,515

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23

Consolidated Statement of Changes in Equity

for the year ended 31 March 2023

Share
Capital
£000’s

Share
Premium
£000’s

Revaluation
Reserve
£000’s

Other
Reserves
£000’s

Foreign
Exchange
Reserve
£000’s

Retained
Earnings
£000’s

Total
£000’s

Non-
controlling
Interest
£000’s

Total
Equity
£000’s

Balance as at 31 March 2021

3,379

63,258

656

106

1,092

13,410

81,901

13,414

95,315

Loss for the year

Other comprehensive income:

Foreign currency differences

Deferred tax on revaluation of
freehold property

Actuarial gains on pension
scheme assets

Total comprehensive income
for the year

Transactions with owners:

Issue of shares in the year

Share-based payments

Dividends

Transactions with owners

(686)

(19)

(705)

1,096

1,099

2,195

1,096

(662)

435

1,080

1,515

342

(677)

(335)

342

(677)

(272)

342

(2,210)

(2,887)

(2,210)

(2,482)

Balance at 31 March 2022

3,381

63,319

657

106

2,188

12,413

82,064

12,284

94,348

Profit for the year

Other comprehensive income:

Foreign currency differences

Actuarial gains on pension
scheme assets

Total comprehensive income
for the year

Transactions with owners:

Share-based payments

Dividends

Transactions with owners

1,008

2,083

3,091

(310)

(276)

(586)

100

(310)

1,108

798

1,807

2,605

408

(1,810)

408

(1,810)

(1,402)

Balance at 31 March 2023

3,381

63,319

657

106

1,878

13,929

83,270

12,281

95,551

The notes on pages 50 to 92 form part of these financial statements.

ECO Animal Health Group Plc Annual Report 2022/23Statement of Changes in Equity

for the year ended 31 March 2023

Company

Balance as at 31 March 2021

3,379

63,258

385

106

10,326

77,454

Share Capital
£000’s

Share
Premium
£000’s

Revaluation
Reserve
£000’s

Other
Reserves
£000’s

Retained
Earnings
£000’s

Total
£000’s

Loss for the year

Other comprehensive income:

Deferred tax on revaluation of freehold
property

Actuarial gains on pension scheme assets

Total comprehensive income for the year

Transactions with owners:

Issue of shares in the year

Share-based payments

Dividends

Transactions with owners

Balance at 31 March 2022

(1,586)

(1,562)

(1,561)

342

(677)

(335)

342

(677)

(272)

3,381

63,319

386

106

8,429

75,621

Loss for the year

Other comprehensive income:

Actuarial gains on pension scheme assets

Total comprehensive income for the year

Transactions with owners:

Share-based payments

Transactions with owners

Balance at 31 March 2023

(1,701)

100

(1,601)

408

3,381

63,319

386

106

7,236

74,428

The notes on pages 50 to 92 form part of these financial statements.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Statements of Financial Position

(CO. NUMBER: 01818170)

as at 31 March 2023

Group

Company

2023

2022

2023

2022

2021

Notes

£000’s

£000’s
Restated

35,636

6,097

4,282

252

559

34,304

3,465

227

1,773

212

523

565

21,165

51,526

748

227

21,230

52,742

651

305

21,047

54,894

46,826

40,504

73,339

75,056

76,934

22,409

26,850

2,947

395

30,142

25,969

1,596

1,075

21,658

14,314

230

74,489

73,096

121,315

113,600

1,073

388

230

1,734

75,073

338

386

279

281

819

1,003

76,059

1,127

78,061

(14,523)

(12,954)

(520)

(326)

(524)

(5,178)

(1,017)

(516)

(884)

(50)

(3,875)

(224)

(239)

(397)

(50)

(22,168)

(17,739)

52,321

99,147

55,357

95,861

(41)

(50)

(611)

1,123

(13)

(50)

(389)

614

(7)

(50)

(581)

546

74,462

75,670

77,480

(3,596)

95,551

(1,513)

94,348

(34)

(49)

(32)

74,428

75,621

77,454

Non-current assets

Intangible assets

Property, plant and equipment

Investment property

Right-of-use assets

Investments

Amounts due from subsidiary Company

Deferred tax assets

Total non-current assets

Current assets

Inventories

Trade and other receivables

Income tax recoverable

Other taxes and social security

Cash and cash equivalents

Assets held for sale

Total current assets

Total assets

Current Liabilities

Trade and other payables

Provisions

Income tax payable

Other taxes and social security payable

Lease liabilities

Dividends

Current liabilities

Net current assets

Total assets less current liabilities

Non-current liabilities

Deferred tax liabilities

Lease liabilities

Total assets less total liabilities

ECO Animal Health Group Plc Annual Report 2022/23Group

Company

2023

2022

2023

2022

2021

Notes

£000’s

£000’s
Restated

3,381

63,319

657

106

1,878

13,929

83,270

12,281

95,551

3,381

63,319

657

106

2,188

12,413

82,064

12,284

94,348

3,381

63,319

386

106

7,236

74,428

3,381

63,319

386

106

8,429

75,621

3,379

63,258

385

106

10,326

77,454

74,428

75,621

77,454

Equity

Issued share capital

Share premium account

Revaluation reserve

Other reserves

Foreign exchange reserve

Retained earnings

Shareholders' funds

Non-controlling interests

Total equity

Approved by the Board and authorised for issue on 9 July 2023

Dr Andrew Jones,
Chairman.

The notes on pages 50 to 92 form part of these financial statements.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Statements of Cash Flows

for the year ended 31 March 2023

Cash flows from operating activities

Profit/(loss) before income tax

Adjustment for:

Finance income

Finance cost

Foreign exchange (gain)/loss

Depreciation

Amortisation of right-of-use assets

Revaluation of investment property

Amortisation of intangible assets

Impairment of intangible assets

Share of associate's results

Share based payment charge

Dividends received

Group

Company

Notes

2023
£000’s

2022
£000’s

2023
£000’s

2022
£000’s

4,440

1,389

(1,793)

(1,611)

(104)

656

(468)

812

452

(3)

1,087

(45)

408

(190)

284

(989)

455

398

1,140

2,085

(43)

342

(1,225)

(832)

151

183

(3)

179

(2)

342

(177)

Operating cash flows before movements in working capital

7,235

4,949

(2,481)

(2,087)

7,776

(8,585)

(1,843)

3,802

1,439

18,409

(451)

(2,052)

15,906

7,630

(2,868)

1,392

2,518

(106)

(2,960)

(548)

(3,562)

(1,624)

(2,419)

(1,263)

104

190

(5,877)

(2,694)

1,109

202

100

(1,070)

(139)

(14)

(1,223)

1,225

144

1,369

2,385

(174)

124

(60)

(17)

(125)

177

Change in inventories

Change in receivables

Change in payables

Change in provisions and pensions

Cash generated from operations

Finance costs

Income tax

Net cash from/(out) operating activities

Cash flows from investing activities

Acquisition of property, plant and equipment

Disposal of property, plant and equipment

Purchase of intangibles

Finance income

Dividends received

Net cash (used in)/from investing activities

ECO Animal Health Group Plc Annual Report 2022/23

Cash flows from financing activities

Proceeds from issue of share capital

Interest paid on lease liabilities

Principal paid on lease liabilities

Dividends paid

Net cash (used in)/from financing activities

Net increase/(decrease) in cash and cash equivalents

Foreign exchange movements

Balance at the beginning of the period

Balance at the end of the period

The notes on pages 50 to 92 form part of these financial statements.

Group

Company

Notes

2023
£000’s

2022
£000’s

2023
£000’s

2022
£000’s

(205)

(387)

(1,810)

(2,402)

7,627

(283)

14,314

21,658

(111)

(371)

(2,886)

(3,305)

(6,547)

1,338

19,523

14,314

(12)

(21)

(33)

113

(4)

279

388

(11)

(14)

(677)

(639)

(540)

819

279

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Notes to the Consolidated Financial Statements

for the year ended 31 March 2023

1. General information

ECO Animal Health Group plc (“the Company”) and its subsidiaries
(together “the Group”) manufacture and supply animal health products
globally.

The Company is traded on the AIM market of the London Stock
Exchange and is incorporated and domiciled in the UK. The address
of its registered office is The Grange, 100 High Street, Southgate,
London, N14 6BN.

2. Summary of the Group and
Company’s significant accounting
policies

2.1 Basis of preparation
These financial statements have been prepared in accordance with
UK-adopted International Financial Reporting Standards. There were no
changes to accounting policies on adoption of UK IFRSs.

The preparation of financial statements, in accordance with UK-adopted
international accounting standards, requires the use of estimates and
assumptions that affect the reported amounts of assets and liabilities
at the date of the financial statements and the reported amounts
of revenue and expenses during the reporting period. Although
these estimates are based on management’s best knowledge of the
amount, event or actions, actual results ultimately may differ from
those estimates.

The estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the period
in which the estimate is revised if the revision affects only that period
or in the period of the revision and future periods if the revision affects
both current and future periods. Further details of estimates and
judgements are provided in note 2.30.

The principal accounting policies are set out below and have been
applied consistently in dealing with items which are considered material
in relation to the financial statements. They are prepared under the
historical cost convention with the exception of certain items which are
measured at fair value as described in the accounting policies below.

Going Concern
After making appropriate enquiries, the Directors have, at the time of
approving the financial statements, formed a judgement that there is a
reasonable expectation that the Company and Group have adequate
resources to continue in operational existence for the foreseeable
future. For this reason, the Directors continue to adopt the going
concern basis in preparing the financial statements.

This conclusion is based on a review of the resources available to the
Group, taking account of the Group’s financial projections together with
available cash and committed borrowing facilities. The Directors have
performed a reverse stress test on the business, by considering what
quantum of revenue and gross margin reduction would be required to
exhaust all available funds within 12 months of the date of approving
the financial statements, having due regard to the identified strategic
risks. The Directors concluded that the likelihood of such a reduction
was remote, and therefore that no material uncertainty exists with
respect of going concern.

2.2 Adoption of new and revised standards
No new standards or amendments that became effective in the
financial year had a material impact in preparing these financial
statements.

There are a number of standards and amendments to standards which
have been issued by the IASB that are effective in future accounting
periods that have not been adopted early.

The following standard is effective for annual reporting periods
beginning on or after 1 January 2023:

•

IFRS 17 – Insurance Contracts

The following amendments are effective for annual reporting periods
beginning on or after 1 January 2023:

• Amendments to IFRS 17

• Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS

Practice Statement 2);

• Definition of Accounting Estimates (Amendments to IAS 8);

• Deferred Tax related to Assets and Liabilities arising from a Single

Transaction (Amendments to IAS 12); and

•

International Tax Reform – Pillar Two Model Rules (Amendments to
IAS 12).

The following amendments are effective for annual reporting periods
beginning on or after 1 January 2024:

• Classification of liabilities as current or non-current (Amendments

to IAS 1);

• Lease Liability in a Sale and Leaseback (Amendments to IFRS 16);

• Non-current liabilities with covenants (Amendments to IAS 1); and

• Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7).

Beyond the information above, it is not practicable to provide a
reasonable estimate of the effect of these standards until a detailed
review has been completed.

2.3 Basis of consolidation
The consolidated financial statements comprise the accounts of the
Company and its subsidiaries drawn up to 31 March 2023.

An entity is classed as a subsidiary of the Company when as a result
of contractual arrangements, the Company has the power to govern
its financial and operating policies so as to obtain benefits from its
activities.

The purchase method of accounting is used to account for the
acquisition of subsidiaries by the Group. The cost of an acquisition
is measured, as the fair value of the assets given, equity instruments
issued and liabilities incurred or assumed at the date of exchange.
Identifiable assets acquired and contingent liabilities assumed in a
business combination are measured initially at their fair values at the
acquisition date, irrespective of the extent of any non-controlling
interest. The excess of the cost of acquisition over the fair value of
the Group’s share of the identifiable net assets acquired is recorded
as goodwill. If the cost of acquisition is less than the fair value, the
difference is recognised directly in the income statement.

ECO Animal Health Group Plc Annual Report 2022/23Accounting policies of subsidiaries have been changed where material
to ensure consistency with the policies adopted by the Group.
Although the subsidiaries in Brazil and China and the joint operations
in the USA and Canada all have December year ends, the Group uses
management accounts to the end of March to prepare the Group
accounts.

Subsidiaries are wholly consolidated from the date on which control is
transferred to the Group. They are deconsolidated from the date that
control ceases.

Intercompany transactions, balances and unrealised gains
on transactions between Group companies are eliminated on
consolidation.

The Group initially recognised any non-controlling interest in the
acquiree at the non-controlling interest’s proportionate share of the
acquiree’s net assets. For each business combination, the Group
elects whether to measure the non-controlling interests in the acquiree
at fair value or at the proportionate share of the acquiree’s identifiable
net assets. Acquisition-related costs are expensed as incurred and
included in administrative expenses. The Group has not elected to take
the option to use fair value in acquisitions completed to date.

Profit or loss and each component of Other Comprehensive Income
are attributed to the equity holders of the parent of the Group and to
the non-controlling interests, even if this results in the non-controlling
interests having a deficit balance.

2.4 Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting to the chief operating decision-maker. The chief
operating decision-maker who is responsible for allocating resources
and assessing performance of the operating segments has been
identified as the Board.

Assets and liabilities of the Group are not reviewed on a segment basis
by the chief operating decision-maker, accordingly assets and liabilities
on a segment basis are not presented in these consolidated financial
statements.

2.5 Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each of the Group’s
entities are measured using the currency of the primary economic
environment in which the entity operates (“functional currency”). The
consolidated and company financial statements are presented in
Pounds Sterling, which is the Group and the Company’s functional
currency.

(b) Transactions and balances
Monetary assets and liabilities denominated in foreign currencies are
translated into Pounds Sterling at the rates of exchange ruling at the
date of the financial statements.

Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the date of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at period
end exchange rates of monetary assets and liabilities denominated
in foreign currencies are recognised in the income statement within
administrative expenses.

Foreign exchange gains and losses that relate to borrowing and cash
and cash equivalents are presented in the income statement within
administrative expenses.

(c) Group companies
The results and financial position of all Group entities that have
a functional currency different from the Group’s functional and
presentation currency are translated into the Group’s functional and
presentation currency as follows:

•

assets and liabilities for each Statement of financial position
presented are translated at the closing exchange rate at the date of
the Statement of financial position;

income and expenses for each income statement are translated
at average exchange rates unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case the income and expenses are
translated at the rate on the dates of the transaction; and

•

all resulting exchange differences are recognised through other
comprehensive income as a separate component of equity.

When a foreign operation is partially disposed or sold, exchange
differences that were recognised in equity are recognised in the
income statement as part of the gain or loss on sale. Goodwill and
fair value adjustments arising on the acquisition of a foreign entity are
treated as assets and liabilities of the foreign entity and translated at
the closing exchange rate.

2.6 Financial instruments
Financial assets
Financial assets comprise mainly trade and other receivables and
cash and cash equivalents in the consolidated statement of financial
position. These financial assets arise principally from the provision of
goods to customers and are measured at amortised cost.

Impairment provisions for current and non-current trade receivables
are recognised based on the simplified approach within IFRS 9 using
a provision matrix in the determination of the lifetime expected credit
losses. During this process, the probability of the non-payment of the
trade receivables is assessed with reference to historical data adjusted
by forward-looking information. This probability is then multiplied by
the amount of the expected loss arising from default to determine
the lifetime expected credit loss for the trade receivables. For trade
receivables, which are reported net, such provisions are recorded in
a separate provision account with the loss being recognised within
Administrative expenses in the consolidated income statement. On
confirmation that the trade receivable will not be collectable, the
gross carrying value of the asset is written off against the associated
provision.

Impairment provisions for receivables from related parties and loans
to related parties are recognised based on a forward looking expected
credit loss model. The methodology used to determine the amount
of the provision is based on whether there has been a significant
increase in credit risk since initial recognition of the financial asset. For
those where the credit risk has not increased significantly since initial
recognition of the financial asset, twelve month expected credit losses
along with gross interest income are recognised. For those for which
credit risk has increased significantly, lifetime expected credit losses
along with the gross interest income are recognised. For those that are
determined to be credit impaired, lifetime expected credit losses along
with interest income on a net basis are recognised.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Notes to the Consolidated Financial Statements (continued)

Financial liabilities
Financial liabilities comprise mainly trade and other payables and bank
overdrafts in the consolidated statement of financial position. These
financial liabilities are initially recognised at fair value and subsequently
measured at amortised cost in accordance with IFRS 9.

IAS 38 includes additional recognition criteria for internally generated
intangible assets.

Expenditure on the research phase of an internal project is expensed
as incurred. Expenditure in the development phase of an internal
project is capitalised if the entity can demonstrate:

2.7 Goodwill
Goodwill arising on the acquisition of an entity represents the excess
of the costs of acquisition over the Group’s interest in the net fair value
of the identifiable assets, liabilities and contingent liabilities of the entity
recognised at the date of acquisition.

Goodwill is initially recognised as an asset at cost and is subsequently
measured at cost less any accumulated impairment losses. Goodwill is
not subject to amortisation but is tested for impairment annually.

Negative goodwill arising on an acquisition is recognised directly
in the income statement. On disposal of a subsidiary or a jointly
controlled entity, the attributable amount of goodwill is included in the
determination of the profit or loss recognised in the income statement
on disposal. Goodwill arising before the date of transition to IFRS, on
1 April 2004, has been retained at the previous UK GAAP amounts,
subject to being tested for impairment at that date. Goodwill written
off to reserves under UK GAAP prior to 1998 has not been reinstated
and is not included in determining any subsequent profit or loss on
disposal.

2.8 Other intangible assets
IAS 38 – Intangible Assets includes guidance on the accounting for
Research and Development expenditure. Such an intangible asset is a
resource that is controlled by the entity as a result of past events (for
example, purchase or self-creation) and from which future economic
benefits (inflows of cash or other assets) are expected. The three
critical attributes of an intangible asset are:

•

Identifiability;

• control (power to obtain benefits from the asset); and

•

future economic benefits (such as revenues or reduced future
costs).

Identifiability
An intangible asset is identifiable when it:

•

is separable (capable of being separated and sold, transferred,
licensed, rented, or exchanged, either individually or together with a
related contract); or

arises from contractual or other legal rights, regardless of whether
those rights are transferable or separable from the entity or from
other rights and obligations.

Development expenditure – whether purchased or self-created
(internally generated) is an example of an intangible asset, governed
under IAS 38.

Recognition criteria
IAS 38 requires an entity to recognise an intangible asset (at cost) if,
and only if:

•

it is probable that the future economic benefits that are attributable
to the asset will flow to the entity; and

•

the cost of the asset can be measured reliably.

a) the technical feasibility of completing the intangible asset so that it

will be available for use or sale.

b) its intention to complete the intangible asset and use or sell it.

c) its ability to use or sell the intangible asset.

d) how the intangible asset will generate probable future economic
benefits. Among other things, the entity can demonstrate the
existence of a market for the output of the intangible asset or the
intangible asset itself or, if it is to be used internally, the usefulness
of the intangible asset.

e) the availability of adequate technical, financial and other resources
to complete the development and to use or sell the intangible asset.

its ability to measure reliably the expenditure attributable to the
intangible asset during its development.

The probability of future economic benefits must be based on
reasonable and supportable assumptions about conditions that will
exist over the life of the asset.

If an entity cannot distinguish the research phase of an internal project
to create an intangible asset from the development phase, the entity
treats the expenditure for that project as if it were incurred in the
research phase only.

The Group context of IAS 38
Since the early start-up stages of the business, the Group has
and continues to invest significant expenditure in research and
development into new animal treatments and therapies. This has
resulted in a significant family of pharmaceutical treatments for
pigs and poultry. Branded as Aivlosin, this product has developed
over 20 years into treatments for multiple respiratory and intestinal
infections – each of which have separate regulatory and marketing
approvals in each target market. The work to bring Aivlosin from the
laboratory to the commercial farm has moved through the classical
phases of pharmaceutical development and the ECO Animal Health
R&D model can be described by the following broad phases:

• The discovery phase – in vitro, in laboratory.

• The proof of concept phase – key efficacy trials in small groups of

animals.

• The exploratory development phase – optimisation of dose,

economic validation.

• The full development phase – building the data set for dossier

submission.

• Submission of an application for regulatory approval.

• Marketing and regulatory approval granted – commercial revenue

begins.

The application of the principles of IAS 38 to the above model is to
treat expenditure on Research and Development as an expense until
the likely commercial benefits that will flow from the project can be
judged to be highly probable. This means that the technical feasibility
(judged by reference to efficacy) must be certain, the economic
feasibility (judged by reference to manufacturing methodology, market

ECO Animal Health Group Plc Annual Report 2022/23intelligence, overall programme cost) has to be highly probable and
the likelihood of gaining regulatory approval must be judged to be
highly probable. The Directors consider that capitalisation will generally
commence once a project enters the full development phase.

In practice, work that is undertaken to build towards regulatory
approval for a new treatment claim using Aivlosin, vaccines or other
technologies, or an approval for marketing new technologies of
applications in a new geographical market can be viewed as starting
at the full development phase and are likely to meet the capitalisation
criteria whereas costs in relation to some of the Group’s recently
announced projects, on vaccine development, for example, are likely
to meet the capitalisation requirements once they are approved
internally to commence the full development phase, subject to careful
consideration of residual technical feasibility/risk.

Amortisation of capitalised expenditure is determined with reference to
the point at which regulatory approval is given to the product to which
the expenditure relates. For historic periods, the approach adopted has
been to amalgamate the expenditure incurred on all projects relating
to the same product, since the last regulatory approval and then
identify the next nearest regulatory approval given for that product in
either the same or a subsequent half-year. Amortisation begins in the
half-year following the receipt of regulatory approval. A full six months
of amortisation is charged in the first half-year for which costs are
amortised.

Where it is possible to allocate an individual capitalised cost to a single
identifiable project the start date for amortisation is the half-year
following the half-year period in which the project receives regulatory
approval. Where regulatory approval has not been received for a
project, the amortisation has not started.

Amortisation is provided at rates calculated to write off the cost less
estimated residual value of each asset over its expected useful life, as
follows:

Aivlosin

Ecomectin

Vaccines

Trade marks and patents

5% on cost

10% on cost

5% on cost

10% on cost

2.9 Property, plant and equipment and
depreciation
Plant and equipment are stated at cost less depreciation. Depreciation
is provided at rates calculated to write off the cost less estimated
residual value of each asset over its expected useful life, as follows:

Plant and machinery

10%-20% on cost

Fixtures, fittings and equipment

10%-20% on cost

Motor vehicles

25% on cost

Leasehold Improvement

18%-25% on cost

Freehold land and buildings valuations are measured as a level 3
recurring fair value measurement. The property is professionally valued
by a qualified surveyor at least once every three years. Surpluses
(which are not reversals of previous deficits) arising from the periodic
valuations are taken to other comprehensive income, and deficits
(which are not reversals of previous surpluses) are taken to the income
statement within administrative expenses. Depreciation is provided at
a rate calculated to expense the valuation less estimated residual value
over the remaining useful life of the building at a rate of 2% per annum
on a straight line basis. Land is not depreciated.

2.10 Impairment of non-financial assets
The carrying amounts of assets are reviewed at each year end, to
determine whether there is any indication of impairment. If any such
indication exists, the asset’s recoverable amount is estimated in order
to determine the impairment loss if any. The recoverable amount is the
higher of its fair value and its value in use. For intangible assets with
an indefinite useful life or not available for use, an impairment test is
performed at each year end.

In assessing value in use, the expected future cashflows from the asset
are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and
the risks specific to the asset.

An impairment loss is recognised in the income statement whenever
the carrying amount of an asset or its cash-generating unit exceeds its
recoverable amount.

A previously recognised impairment loss for costs other than goodwill
is reversed if the recoverable amount increases as a result of a
change in the estimates used to determine the recoverable amount,
but not to an amount higher than the carrying amount that would
have been determined (net of depreciation) had no impairment loss
been recognised in prior years and no reversal of impairment losses
recognised on goodwill.

2.11 Investment property
Investment property is held either to earn rental income or for capital
appreciation or for both, but not for sale in the ordinary course of
business, use in the production or supply of goods or services or for
administrative purposes. Investment property is measured at fair value
as a level 3 recurring fair value measurement.

The property is professionally valued by a qualified surveyor at least
once every three years. Surpluses and deficits arising from the periodic
valuations are taken to the income statement within administrative
expenses.

2.12 Investments in subsidiaries
An investment in a subsidiary is where the Group own a controlling
interest in an entity. Investments in subsidiaries are stated at cost less
impairment in the Parent Company’s statement of financial position.

Other non-current asset investments are stated at fair value. They
are recognised or derecognised on the date when the contract for
acquisition or disposal requires the delivery of that investment.

Investments are assessed for impairment at the end of each
reporting period. An impairment is recognised in profit or loss when
the recoverable amount of an asset is less than its carrying amount,
with the value of any impairment being the difference between the
recoverable amount and carrying amount.

Impairments can be reversed in subsequent periods where there is any
indication that the impairment loss recognised in a prior period may no
longer exist or have decreased.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23

Notes to the Consolidated Financial Statements (continued)

2.13 Joint arrangements
A joint arrangement is a contractual arrangement whereby the Group
and other parties undertake an economic activity that is subject to
joint control; that is, when the strategic financial and operating policy
decisions relating to the activities require the unanimous consent of
the parties sharing control.

incurred, and lease payments made at or before the commencement
date, less any lease incentives received. Right-of-use assets are
depreciated on a straight-line basis over the lease term.

If ownership of the leased asset transfers to the Group at the end of
the lease term or the cost reflects the exercise of a purchase option,
depreciation is calculated using the estimated useful life of the asset.

The group classifies its interests in joint arrangements as either:

• Joint ventures: where the group has rights to only the net assets of

the joint arrangement.

• Joint operations: where the group has both the rights to assets and

obligations for the liabilities of the joint arrangement.

In assessing the classification of interests in joint arrangements, the
Group considers:

• The structure of the joint arrangement.

• The legal form of joint arrangements structured through a separate

vehicle.

• The contractual terms of the joint arrangement agreement.

• Any other facts and circumstances (including any other contractual

arrangements).

The Group has interests in joint operations. The Group recognises its
share of the assets, liabilities, income, expenses and cashflows of joint
operations combined with the equivalent items in the consolidated
financial statements on a line-by-line basis.

2.14 Investments in associates
An associate is an entity in which an investor has significant influence
but not control or joint control. Significant influence is defined as “the
power to participate in the financial and operating policy decisions but
not to control them”.

The Group reports its interests in associates using the equity method
of accounting. Under this method, an equity investment is initially
recorded at cost (subject to initial fair value adjustment if acquired as
part of the acquisition of a subsidiary) and is subsequently adjusted to
reflect the Group’s share of the net profit or loss of the associate. If the
Group’s share of losses of an associate equal or exceed its “interest in
the associate”, the Group discontinues recognising its share of further
losses. If the associate subsequently reports profits, the investor
resumes recognising its share of those profits only after its share of the
profits equals the share of losses not recognised.

2.15 Leasing
The Group assesses at contract inception whether a contract is, or
contains, a lease. That is, if the contract conveys the right to control
the use of an identified asset for a period of time in exchange for
consideration.

The Group applies a single recognition and measurement approach
for all leases under IFRS 16, except for short-term leases and leases of
low-value assets.

Right-of-use assets
The Group recognises right-of-use assets at the commencement
date of the lease, which is the date the underlying asset is available
for use. Right-of-use assets are measured at cost, less any
accumulated depreciation and impairment losses, and adjusted for
any re-measurement of lease liabilities. The cost of right-of-use assets
includes the amount of lease liabilities recognised, initial direct costs

The right-of-use assets are also subject to impairment. Refer to the
accounting policies in the section 2.10 for further details.

Lease liabilities
At the commencement date of the lease, the Group recognises lease
liabilities measured at the present value of the lease payments to be
made over the lease term. The lease liabilities include the present value
of the following lease payments:

•

fixed payments (including in-substance fixed payments), less any
lease incentives receivable;

variable lease payments that are based on an index or a rate, initially
measured using the index or rate as at the commencement date;

amounts expected to be payable by the Group under residual value
guarantees;

the exercise price of a purchase option if the Group is reasonably
certain to exercise that option; and

• payments of penalties for terminating the lease, if the lease term

reflects the Group exercising that option.

Lease payments to be made under reasonably certain extension
options are also included in the measurement of the liability.

The lease payments are discounted using the interest rate implicit
in the lease. If that rate cannot be readily determined, the lessee’s
incremental borrowing rate is used, being the rate that the individual
lessee would have to pay to borrow the funds necessary to obtain an
asset of similar value to the right-of-use asset in a similar economic
environment with similar terms, security and conditions. In addition,
the carrying amount of lease liabilities is re-measured if there is
a modification, a change in the lease term, a change in the lease
payments (for example, changes to future payments resulting from a
change in an index or rate used to determine such lease payments)
or a change in the assessment of an option to purchase the
underlying asset.

The Group is exposed to potential future increases in variable lease
payments based on an index or rate, which are not included in the lease
liability until they take effect. When adjustments to lease payments
based on an index or rate take effect, the lease liability is reassessed
and adjusted against the right-of-use asset.

Lease payments are allocated between principal and finance cost.
The finance cost is charged to profit or loss over the lease period to
produce a constant periodic rate of interest on the remaining balance
of the liability for each period.

Extension and termination options
Extension and termination options are included in a number of property
and equipment leases across the Group. These are used to maximise
operational flexibility in terms of managing the assets used in the
Group’s operations. The majority of extension and termination options
held are exercisable only by the Group and not by the respective lessor.

The Group applies judgement in evaluating whether it is reasonably
certain whether or not to exercise the option to renew or terminate the

ECO Animal Health Group Plc Annual Report 2022/23lease. That is, it considers all relevant factors that create an economic
incentive for it to exercise either the renewal or termination. After the
commencement date, the Group reassesses the lease term if there is
a significant event or change in circumstances that is within its control
and affects its ability to exercise or not to exercise the option to renew
or to terminate.

Recognition exemptions
The Group applies the short-term lease recognition exemption to its
short-term leases, being those leases that have a lease term of twelve
months or less from the commencement date and do not contain a
purchase option.

The Group also applies the recognition exemption to leases of which
the underlying asset is of low value, comprising assets below the
Group’s capitalisation threshold. Lease payments on short-term leases
and leases of low-value assets are recognised as an expense on a
straight-line basis over the lease term.

Practical expedients
The Group applies a single discount rate to a portfolio of leases with
reasonably similar characteristics.

2.16 Inventories
Inventories are valued at the lower of cost and net realisable value.
Cost is determined using the historical batch price of the principal
raw materials and the weighted average cost for other ingredients
and other product costs. The cost of finished goods comprises raw
materials, packaging costs and sub-contracted manufacturing costs.
Net realisable value is the estimated selling price in the ordinary course
of business, less any costs which would be incurred in completing the
goods ready for sale.

2.17 Trade receivables
Trade receivables are initially measured at fair value and are
subsequently measured at amortised cost using the effective interest
rate method. Trade receivables are presented net of discounts or other
variable consideration adjustments earned, where the expectation
and intention is to settle the balance net. Impairment provisions are
recognised based on the simplified approach in accordance with
IFRS 9 using a provision matrix in the determination of the lifetime
expected credit losses. See impairment section in section ‘2.6 Financial
instruments’ for more details.

2.18 Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held on call
with banks, other short-term highly liquid investments with original
maturities of three months or less. For the purpose of the statement
of cash flows, bank overdrafts are included in the presentation of cash
and cash equivalents.

2.19 Financial liabilities and equity
Financial liabilities and equity instruments are classified according to
the substance of the contractual arrangements entered into. An equity
instrument is any contract that evidences a residual interest in assets
after deducting all of its liabilities.

2.20 Bank borrowings and loans
Interest-bearing bank loans and overdrafts are recorded as the
proceeds received, net of direct issue costs (which equate to fair
value). Finance charges including premiums payable on settlement or
redemption and direct issue costs are accounted for on an amortised
cost basis in profit or loss using the effective interest rate method and
are added to the carrying amount of the instrument to the extent that
they are not settled in the period in which they arise.

2.21 Trade payables
Trade payables are initially measured at fair value and are subsequently
measured at amortised cost using the effective interest rate method.

2.22 Provisions
Provisions are recognised when there is a present obligation as a
result of a past event and it is probable that the an outflow of resources
will be required to settle the obligation. Provisions are measured at
the Directors’ best estimate of the expenditure required to settle the
obligation outstanding at the year end and are discounted to present
value where the effect is material.

2.23 Revenue recognition
Revenue comprises the fair value of the consideration received or
receivable for the sale of goods in the ordinary course of the Group’s
activities. The Group’s revenue is principally derived from selling goods
with revenue recognised at a point in time when control of the goods
has transferred to the customer. This point in time is determined with
reference to INCO terms with that customer, with control of goods
deemed to have transferred as per the relevant INCO terms. The most
common terms used by the group are Carriage, Insurance and Freight
(“CIF”), Free On Board (“FOB”), ExWorks (“EXW”) and Carriage and
Insurance Paid to (“CIP”).

• For transactions under CIF and FOB, the revenue is recognised at
the point the goods are loaded onto the vessel or aircraft and a bill
of lading or airway bill is issued.

• For transactions under EXW, the revenue is recognised at the point
the goods are collected from the Group’s warehouses or factory.

• For transactions under CIP, the revenue is recognised at the point
the goods are loaded on to a truck at the designated point of
departure and a loading note is issued.

Revenue is shown net of value added tax, returns, rebates and
discounts and after eliminating sales within the Group. Transaction
price is determined by the contract and variable consideration relating
to discounts, free goods or volume rebates have been constrained in
estimating contract revenue that is highly probable by using the most
likely amount method.

The Group’s contracts for delivery of goods are less than 12 months,
there are no warranties within its sales contracts.

Revenue is recognised when the performance obligation is fulfilled,
and the amount can be measured reliably. The performance obligation
is fulfilled when control of the goods passes to the customer, which is
normally in accordance with INCO terms or receipt by customer. No
goods are dispatched on a sale or return basis. Distributors trade on
their own account and not as agents.

The Group also receives interest and royalty income, which are
recognised on an accrual basis.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Notes to the Consolidated Financial Statements (continued)

2.24 Pensions
Defined Contribution Scheme
The pension costs charged against operating profits represent the
amount of the contributions payable to the schemes in respect of the
accounting period.

Defined Benefit Scheme
The regular cost of providing retirement pensions and related benefits
is charged to the income statement over the employees’ service lives
on the basis of a constant percentage of earnings. The present value
of the defined benefit obligation less the fair value of the plan assets is
disclosed as an asset or liability in the statement of financial position in
accordance with IAS 19. The disclosure of a net defined benefit asset
is limited to the present value of any economic benefit available in the
form of refunds from the plan or reductions in future contributions
to the plan. Actuarial gains or losses are recognised through other
comprehensive income.

2.25 Share-based payments
The Group issues equity-settled share options to certain employees
in exchange for services from those employees. Equity-settled share
options are measured at fair value (excluding the effect of non -market
based vesting conditions) at the date of grant.

The fair value determined at the grant date of such equity-settled share
options is expensed on a straight-line basis over the vesting period,
based on the Group’s estimate of shares that will eventually vest and
adjusted for the effect of non-market based vesting conditions (with a
corresponding movement in equity).

Fair value is measured by use of the Black-Scholes model for those
options granted with non-market performance conditions. The
expected life used in the model has been established based on
management’s best estimate of the effects of non-transferability,
exercise restrictions and behaviour considerations.

In addition, the binomial model has been used to model future market
outcomes for those options granted with a market performance
condition.

Further details of the inputs to the Black-Scholes and the binomial
model can be found in note 25 to the accounts.

Share-based payment charges are credited to retained earnings.

2.26 Taxation
Tax expense for the period comprises current and deferred tax.

Current tax, including UK corporation tax and foreign tax is provided
at amounts expected to be paid (or recovered) using the tax rates and
laws that have been enacted or substantively enacted by the year end.
Tax expenses are recognised in profit or loss or other comprehensive
income according to the treatment of the transactions which give rise
to them.

Deferred income tax is recognised, using the liability method, on
temporary differences arising between the tax basis of assets and
liabilities and their carrying amount in the financial statements.

Deferred income tax is determined using tax rates (and laws) that have
been enacted, or substantively enacted, by the date of the statement
of financial position and are expected to apply when the related
deferred tax asset is realised or deferred tax liability is settled.

Deferred tax assets are recognised only to the extent that it is probable
that future taxable profits will be available against which the temporary
differences can be utilised.

IFRIC 23 Uncertainty over Income Tax Treatments
IFIRC 23 provides guidance on the accounting for current and deferred
tax liabilities and assets in circumstances in which there is uncertainty
over income tax treatments. The interpretation requires:

•

the Group to determine whether uncertain tax treatments should
be considered separately, or together as a group, based on which
approach provides better predictions of the resolution;

the Group to determine if it is probable that the tax authorities will
accept the uncertain tax treatment; and

if it is not probable that the uncertain tax treatment will be accepted,
measure the tax uncertainty based on the most likely amount or
expected value, depending on whichever method better predicts
the resolution of the uncertainty. The measurement is required
to be based on the assumption that each of the tax authorities
will examine amounts they have a right to examine and have
full knowledge of all related information when making those
examinations.

2.27 Equity
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are shown in equity
as a deduction, net of tax, from the proceeds.

Amounts arising on the restructuring of equity and reserves to protect
creditor interests are credited to the capital redemption reserve.

Amounts arising from share-based payment expenses are recorded
within retained earnings.

The cost of its own shares bought into treasury is debited to retained
earnings as required by the Companies Act 2006. A subsequent sale of
these shares would result in this entry being wholly or partly reversed
with any profit on the sale being credited to Share Premium.

Amounts arising from the revaluation of non-monetary assets and
liabilities held in foreign subsidiaries, and joint operations are held within
the foreign exchange revaluation reserve.

2.28 Non-controlling interest
For each business combination, the Group elects to measure any
non-controlling interest in the acquiree either at fair value or at
their proportionate share of the acquiree’s identifiable net assets.
Changes in the Group’s interest in a subsidiary that do not result in a
loss of control are accounted for as transactions with owners in their
capacity as owner. Adjustments to non-controlling interests are based
on a proportionate amount of the net assets of the subsidiary. No
adjustments are made to goodwill and no gain or loss is recognised in
the income statement.

2.29 Dividend distribution
Dividends are recorded when they become a legal obligation of the
Company. For final dividends, this will be when they are approved by
the shareholders at the AGM. For interim dividends, this will be when
they have been paid.

ECO Animal Health Group Plc Annual Report 2022/232.30 Critical accounting estimates and
judgements
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom equal
the related actual results. The estimates and assumptions that have
a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are as
follows:

Impairment review of intangible assets
The Group tests annually whether intangible assets with indefinite
life, or not yet available for use, have suffered any impairment. Other
intangible assets are reviewed for impairment when an indication of
potential impairment exists. Impairment provisions are recorded as
applicable based on Directors’ estimates of recoverable values.

The recoverable amounts of the Cash Generating Units (CGUs) to
which intangible assets are allocated are determined from value in use
calculations. The key assumptions for the value in use calculations are
those regarding discount rates, growth rates and the assumption of an
indefinite future life for the assets giving rise to the cash flows. Where
intangible assets relate to future product releases the key assumptions
also relate to forecasts for market share and product pricing. These
assumptions and other commercial outlook conditions may change,
which in turn might result in material changes in the recoverable
amount in the future. The Group also reviews and quantifies the tax
implications related to any recognised impairments and these are
included within tax calculations as appropriate.

Further details of the impairment reviews performed can be found in
note 12 of the financial statements.

Fair value measurement
A number of assets and liabilities included in the Group’s financial
statements require measurement, and/or disclosure of, fair value.

The fair value measurement of the Group’s financial and non-financial
assets and liabilities utilises market observable inputs and data as far
as possible. Inputs used in determining fair value measurements are
categorised into different levels based on how observable the inputs
used in the valuation technique utilised are (the ‘fair value hierarchy’):

• Level 1: Quoted prices in active markets for identical items

(unadjusted).

• Level 2: Observable direct or indirect inputs other than Level 1

inputs.

• Level 3: Unobservable inputs (i.e. not derived from market data).

The classification of an item into the above levels is based on the
lowest level of inputs used that has a significant effect on the fair value
measurement of the item.

The Group measures a number of items at fair value, including:

•

land and buildings (note 13);

investment property (note 14);

• Pension and other post-retirement benefit commitments (note 24);

•

share-based payments (note 25); and

initial recognition of financial instruments (note 32).

For more detailed information in relation to the fair value measure of the
items above please refer to the applicable notes.

Provisions
Certain aspects of a sales tax related to imported products in a Group
subsidiary might have been applicable. The subsidiary has been
importing an increasing volume of product in recent years. This matter
is at an early stage and subject to further review of the tax legislation
and case law. No tax payment has yet been determined. However,
a substantial tax settlement may be required in due course and a
provision has been recognised.

Pension scheme
The Group maintains one defined benefit pension scheme which has
been accounted for according to the provisions of IAS 19. Although
the assumptions were determined by a qualified actuary, any change
in those assumptions may materially impact the financial position and
results of the Group. Details of the assumptions used can be found in
note 24 of the financial statements.

Share-based payments
The charge to the Income Statement in respect of share-based
payments has been externally calculated using management’s best
estimates of the number of options expected to vest and various other
inputs to the Black-Scholes and the binomial model, as disclosed in
note 25. Variations in those assumptions in the model may have a
material impact on the Group’s results and financial position at the
time of valuation. Those options that contain market conditions have
been valued using the binomial model, and those without have been
calculated using the Black-Scholes model. Management assess
whether the charge or vested portion should be amended based on
an annual reassessment of the likelihood of non-market based vesting
conditions being met.

Leases – estimating the incremental borrowing rate
Where the Group cannot readily determine the interest rate implicit in
the lease, it uses its incremental borrowing rate (IBR) to measure lease
liabilities. The IBR is the rate of interest that the Group would have to
pay to borrow over a similar term, and with a similar security, the funds
necessary to obtain an asset of a similar value to the right-of-use
asset in a similar economic environment. The IBR therefore reflects
what the Group ‘would have to pay’, which requires estimation when
no observable rates are available or when they need to be adjusted to
reflect the terms and conditions of the lease.

In practice, the Group considered the following aspects in the
assessment of IBR. Once decided, the IBR will remain unchanged
unless there are modifications in lease terms or changes in the
assessment of an option to purchase the underlying asset.

A base rate that reflects economic environment and the term of the
lease. This is mainly derived from the yield of a government bond
issued by the country in which the Group has in scope leases. Where
the term of the lease does not conform with the maturity period of
the bond, the Group considered other available information such
as yields on the bonds with the nearest maturity period, or the yield
curve published by the country’s treasury department. Considering
there is often a difference in the cash flow profile between a lease and
government bond, the Group has decided to reduce the base rate by
0.05% to 0.10%.

Financing factors that reflect the lessee companies’ risk premium on
borrowing. Management considered the financial strength and credit
risk of the lessee companies and has estimated the credit spread to be
in the range of 1.50% to 5.00%.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Notes to the Consolidated Financial Statements (continued)

Asset factors that reflect the quality of hypothetical security.
Depending on the location and type of underlying assets, the
Group expects the quality of security in this hypothetical borrowing
transaction to vary. For example, the right to use a warehouse in rural
areas may provide less relevant security compared to commercial
office in a major city’s central business district. Based on the Group’s
assessment, the asset factor ranges between - 0.45% to - 0.50%.

The following are the critical judgements that have been made in the
process of applying the Group’s accounting policies and have the most
significant effects on the amounts recognised in financial statements.

Accounting for ECO Biok as a subsidiary
The Group has determined that it has control over Zhejiang ECO
Biok Animal Health Products Limited (“ECO Biok”) and its results are
therefore consolidated within the Group accounts. The Group owns a
51% interest in ECO Biok and is the entity through which the Group has
chosen to enter the Chinese market. ECO Biok depends on the Group
for the right to sell Aivlosin products.

Capitalisation of intangible assets
The Group assesses development costs incurred for capitalisation
in accordance with the requirements of IAS38 and the Group’s
accounting policy described in note 2.8. The stage of development

3. Prior Year Restatement

and assessment of technical and commercial feasibility, in particular,
require the use of judgements and estimates in consultation with the
new product development team.

Income taxes
The Group is subject to income taxes in the United Kingdom and also in
other jurisdictions.

Significant judgements are required in determining the provision for
income taxes including the use of tax losses and in estimating deferred
tax assets arising from unused tax losses or credits. There are some
transactions and calculations for which the ultimate tax determination
is uncertain, including tax credits for research and development
expenditures. The Group recognises assets and liabilities based on
estimates of the final agreed position.

Where the final tax outcome of these matters is different from the
amounts that were initially recorded, such differences will impact the
income tax and deferred tax provisions in the period in which such
determination is made.

Deferred tax assets on timing differences are recognised to the extent
by which the Directors estimate that future profits will be generated to
utilise the underlying costs or losses to which they relate.

The Group reviewed the accounting for share incentive awards made to employees of subsidiary companies and concluded that the previous
approach to recording the transaction in the balance sheet of the parent company should be by increasing the value of the investment in
subsidiary, rather than recording it as an intercompany receivable. Accordingly, the prior year balance sheets of the Parent company have been
restated to show this presentation. There is no impact or effect on the consolidated financial statements.

2022
as reported
£000’s

Adjustments
£000’s

2022
as restated
£000’s

2021
as reported
£000’s

Adjustments
£000’s

2021
as restated
£000’s

Notes

Non-current assets

Property, plant and equipment

Investment property

Right-of-use assets

Investments

Amounts due from subsidiary
Company

Deferred tax assets

Total non-current assets

Current assets

Trade and other receivables

Other taxes and social security

Cash and cash equivalents

Total current assets

Total assets

748

227

748

227

651

305

651

305

20,032

1,198

21,230

20,032

1,015

21,047

53,940

(1,198)

52,742

55,909

(1,015)

54,894

75,056

338

386

279

1,003

76,059

75,056

76,934

338

386

279

1,003

76,059

281

819

1,127

78,061

76,934

281

819

1,127

78,061

ECO Animal Health Group Plc Annual Report 2022/23Current Liabilities

Trade and other payables

Lease liabilities

Dividends

Current liabilities

Net current assets

Total assets less current liabilities

Non-current liabilities

Deferred tax liabilities

Lease liabilities

Total assets less total liabilities

Equity

Issued share capital

Share premium account

Revaluation reserve

Other reserves

Retained earnings

Shareholders' funds

Non-controlling interests

Total equity

Notes

2022
as reported
£000’s

Adjustments
£000’s

2022
as restated
£000’s

2021
as reported
£000’s

Adjustments
£000’s

2021
as restated
£000’s

(326)

(13)

(50)

(389)

614

75,670

(49)

75,621

3,381

63,319

386

106

8,429

75,621

(326)

(13)

(50)

(389)

614

(524)

(7)

(50)

(581)

546

75,670

77,480

(49)

(32)

75,621

77,454

3,381

63,319

386

106

8,429

75,621

3,379

63,258

385

106

10,326

77,454

75,621

77,454

(524)

(7)

(50)

(581)

546

77,480

(32)

77,454

3,379

63,258

385

106

10,326

77,454

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Notes to the Consolidated Financial Statements (continued)

4. Segment information

Management has determined the operating segments based on the reports reviewed by the Board to make strategic decisions. The Board
considers the business from a geographical perspective. Geographically, management considers the performance in the Corporate/UK, China and
Japan, North America, South and South East Asia, Latin America, Europe and the Rest of the World.

Revenues are geographically allocated by the destination of customer.

The performance of these geographical segments is measured using Earnings before Interest, Tax, Depreciation and Amortisation (“Adjusted
EBITDA**”), adjusted to exclude share-based payments, revaluation, impairment and personnel related litigation matters. Adjusted EBITDA is a
non-GAAP measure used by the management to assess the underlying business performance.

Corporate/
U.K.
£000’s

China &
Japan
£000’s

North
America
£000’s

S & SE
Asia
£000’s

Latin
America
£000’s

Europe
£000’s

Rest of
World
£000’s

Total
£000’s

Year ended 31 March 2023

Sale of goods

Royalties

1,303

26,374

15,172

16,759

18,107

6,073

1,338

85,126

185

Revenue from external customers

1,303

26,374

15,172

16,759

18,107

6,073

1,523

85,311

Adjusted EBITDA**

(19,101)

9,340

5,463

6,767

3,059

1,486

689

7,703

Year ended 31 March 2022

Sale of goods

Royalties

1,525

28,385

16,402

11,816

15,775

6,430

1,623

81,956

239

Revenue from external customers

1,525

28,385

16,402

11,816

15,775

6,430

1,862

82,195

Adjusted EBITDA**

(18,623)

10,260

5,546

4,632

3,035

841

704

6,395

A reconciliation of adjusted EBITDA for reportable segments to profit from operating activities is provided as follows:

Adjusted EBITDA for reportable segments

Depreciation

Amortisation of right-of-use assets

Revaluation of investment property

Provision for ongoing employee litigation

Amortisation

Impairment

Share-based payment charges

Profit from operating activities

Foreign exchange differences

Adjusted EBITDA for the Group

2023
£000’s

7,703

(812)

(452)

(1,087)

(408)

4,947

(468)

7,235

2022
£000’s

6,395

(455)

(398)

(78)

(457)

(1,140)

(2,085)

(342)

1,440

(989)

5,406

**Adjusted EBITDA reported for the segments includes foreign exchange gains and losses. The Adjusted EBITDA for the Group is presented in note 6.

ECO Animal Health Group Plc Annual Report 2022/23Product Revenues

Aivlosin

Ecomectin

Others

Total

All product revenues are recognised at a point in time.

Contract Balances

Within one year or on demand

At 1 April

Amounts included in contract liabilities that was recognised as revenue during the period

Cash received in advance of performance and not recognised as revenue during the period

At 31 March

2023
£000’s

75,942

3,595

5,774

85,311

2023
£000’s

203

(203)

1,079

2022
£000’s

72,939

5,543

3,713

82,195

2022
£000’s

2,155

(2,155)

203

The Group recognised contract liabilities of £1,079,000 at 31 March 2023 (2022: £203,000). The Group does not hold any long-term sales
contracts and any rebates, discounts or free goods incentives are settled and recognised as revenue within the next accounting period. Contract
balances are reported within trade and other payables on the Statement of Financial Position.

5. Other income

Sundry income

6. Result from operating activities

Result from operating activities is stated after charging/(crediting):

Cost of inventories recognised as an expense

Employee benefits expenses

Amortisation of intangible assets

Depreciation

Amortisation of right-of-use assets

Revaluation of investment property

Gain on foreign exchange transactions

Research and development

Impairment losses on trade receivables

Audit fees recognised in the financial period to the Company's auditors for the audit of
the parent Company and Group annual accounts

Audit fees recognised in the financial period to the Company's auditors and its
associates for the audit of the Company's subsidiaries

2023
£000’s

357

2022
£000’s

Notes

2023
£000’s

2022
£000’s

46,461

15,461

1,087

812

452

(3)

468

5,920

533

535

46,482

14,054

1,140

455

398

989

7,621

(167)

452

Total fees payable to the Company’s auditor for the audit of these parent Company and Group annual accounts, for the year ended 31 March 2023,
are £290,000 (2022: £584,000), and fees payable to the Company’s auditor and its associates for the audit of the Company’s subsidiaries are
£24,000 (2022: £83,000).

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Notes to the Consolidated Financial Statements (continued)

Earnings before interest, Tax, Depreciation, Amortisation, Revaluation, Impairment, Personnel related
litigation matters, Share-based payments and Foreign exchange differences (adjusted EBITDA) - Non-
GAAP measure

Profit from operating activities

Depreciation

Amortisation of right-of-use assets

Revaluation of investment property

Amortisation

Impairment

Personnel related litigation matters

Share-based payments

Foreign exchange differences

Adjusted EBITDA

2023
£000’s

2022
£000’s

4,947

1,440

812

452

(3)

1,087

408

7,703

(468)

7,235

455

398

1,140

2,085

457

342

6,395

(989)

5,406

Management believe that adjusted EBITDA is an appropriate measure of the Group’s performance as it is the initial source for all re-investment and
for all returns to shareholders. Investors, bankers and analysts all focus on this important measure of underlying performance because it enables
them to make judgements about the Group’s ability to generate sufficient cash to meet all the re-investment needs of the business while still
providing adequate returns to shareholders. Therefore, adjusted EBITDA has a direct relationship with the value of the Group and is seen by our
investors as a Key Performance Indicator for management.

The following items are adjusted for in the calculation of adjusted EBITDA as defined by the Group.

Item

Rationale for Adjustment

Depreciation and Amortisation

These items are a result of past investments and therefore, although they are correctly recorded as a cost of
the business, they do not reflect current or future cash outflows.

Revaluation of Investment
Property

Gains and Losses on Disposal of
Fixed Assets and Impairment of
Intangibles

Employment litigation

Additionally, Depreciation and Amortisation calculations are subject to judgement regarding useful lives and
residual values of particular assets and the adjustment removes the element of judgement.

These are subject to judgement and do not reflect cash flows.

These items are a result of past investments and therefore, although they are correctly recorded as income or
cost of the business, they do not reflect current or future cash outflows.

Amount in respect of a probable settlement of an employment related matter in a foreign subsidiary of ECO
Animal Health Group plc

Share-based Payments

This item is subject to judgement and will never be reflected in the Group’s cash flows.

Foreign Exchange differences

Since the key driver of this figure is the revaluation of monetary assets denominated in foreign currency at the
period end, which may reverse prior to settlement, taking this figure out of the EBITDA figure removes volatility
from the performance measure. Foreign exchange movements are largely outside of the Group’s control, so
this gives a better measure of the Group’s progress than statutory profit measures which include them.

ECO Animal Health Group Plc Annual Report 2022/23
7. Finance income/(expense)

Finance income

Interest received on short term bank deposits

Finance costs

Interest paid

Interest paid on lease liabilities

Net finance costs

8. Earnings per share

2023
£000’s

2022
£000’s

104

190

(451)

(205)

(656)

(552)

(173)

(111)

(284)

(94)

The calculation of basic earnings per share is based on the post-tax profit for the year divided by the weighted average number of shares in issue
during the year.

2023

Weighted
average
number of
shares

Earnings

Per share
amount

Earnings

2022

Weighted
average
number of
shares

Per share
amount

£000’s

000’s

pence

£000’s

000’s

pence

Earnings attributable to ordinary
shareholders on continuing operations
after tax

Dilutive effect of share options

Diluted earnings per share

1,008

67,722

1.49

(686)

67,717

(1.01)

918

1,008

68,640

1.47

(686)

67,717

(1.01)

The diluted EPS figure reflects the impact of historic grants of share options and is calculated by reference to the number of options granted for
which the average share price for the year was in excess of the option exercise price.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Notes to the Consolidated Financial Statements (continued)

9. Taxation

Current tax

Foreign corporation tax on profits for the year

Foreign withholding tax

Research and development tax credits claimed in the year

Research and development tax credits - adjustment for prior year

Deferred tax

Origination and reversal of temporary differences

Income tax charge

Origination and reversal of temporary differences

Deferred tax recognised through reserves

Factors affecting the tax charge for the year

Profit before income tax

Profit on ordinary activities before taxation multiplied by the applicable rate of UK corporation tax of 19%
(2021: 19%)

Effects of:

Non-deductible expenses

Non-chargeable credits

Right-of-use assets depreciation

Withholding tax on inter-company dividends

Enhanced allowance on research and development expenditure

Adjustment in respect of prior years

Different tax rate for foreign subsidiaries

Origination and reversal of temporary differences

Unused tax losses carried forward

Tax effect of share based payments

Patent Box claim

Income tax charge

Effective income tax rate

2023
£000’s

2,405

325

(1,391)

(36)

1,349

2023
£000’s

4,440

844

1,207

(571)

(37)

325

(573)

506

(363)

(14)

(73)

1,349

30%

2022
£000’s

3,284

406

(1,594)

437

(439)

2,094

(1)

2022
£000’s

1,389

264

1,345

(69)

(37)

406

(1,208)

456

844

114

(109)

2,094

151%

Future tax changes
On 5 March 2021 it was announced that the rate of UK corporation tax would be increased to 25% from 1 April 2023. This change was
substantively enacted in April 2021 and the UK deferred tax assets and liabilities have been calculated based on the enacted rate of 25%
(2022: 25%).

ECO Animal Health Group Plc Annual Report 2022/2310. Loss for the financial year

Parent Company's (loss) for the financial year

2023
£000’s

(1,701)

2022
£000’s

(1,586)

The Company has elected to take the exemption under Section 408 of the Companies Act 2006 not to present the Parent Company income
statement.

11. Dividends

Cash dividends on ordinary shares declared and paid:

Final dividend for the year end 31 March 2022 at 1.0p per ordinary share

677

The Board of Directors does not propose that a dividend be paid for the year ended 31 March 2023 (2022: Nil).

Proposed dividends on ordinary shares are subject to approval at the annual general meeting and are not recognised as a liability as at the date of
the Statement of Financial Position.

2023
£000’s

2022
£000’s

12. Intangible assets

Group

Cost

At 31 March 2021

Additions

Impairment

At 31 March 2022

Additions

Impairment

At 31 March 2023

Amortisation

At 31 March 2021

Charge for the year

Written back on impairment

At 31 March 2022

Charge for the year

Written back on impairment

At 31 March 2023

Net Book Value

At 31 March 2023

At 31 March 2022

At 31 March 2021

Distribution
rights
£000’s

Drug
registrations,
patents and
license costs
£000’s

407

23,963

1,421

(2,092)

23,292

2,419

Goodwill
£000’s

17,930

Total
£000’s

42,300

1,421

(2,092)

41,629

2,419

17,930

407

25,711

44,048

17,930

(139)

(19)

(158)

(20)

(178)

229

249

268

(6,053)

(1,121)

(7,167)

(1,067)

(6,192)

(1,140)

(7,325)

(1,087)

(8,234)

(8,412)

17,477

16,125

17,910

35,636

34,304

36,108

The amortisation and impairment charges are included within administrative expenses in the income statement.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Notes to the Consolidated Financial Statements (continued)

Distribution rights are amortised over their estimated useful life of 20 years and reviewed for impairment when any indication of potential
impairment exists. The remaining amortisation period at the date of the financial statements ranged from 3 to 20 years.

The acquisition of ECO Animal Health Limited in October 2004 gave the Group ownership of the intellectual property and established distribution
networks in respect of Aivlosin and Ecomectin. The acquisitions of Zhejiang Eco Biok Animal Health Products Limited in 2007 and ECO Animal
Health Japan Inc in 2009 opened further distribution and sale opportunities for Aivlosin and Ecomectin.

Goodwill acquired in a business combination is allocated at acquisition to the cash generating units (CGUs) that are expected to benefit from
the business combination. During the year the Group modified the cash flows used in the impairment review of the goodwill balance such that
the Group’s global revenues in respect of Aivlosin and Ecomectin products are now used, and the expected future cash flows in respect of new
vaccines – both the outflows on research and development of these new products and the forecast revenues from sales – are excluded. This
approach is appropriate given that the acquisitions which gave rise to the goodwill balance were made to enhance the Group’s global capacity to
sell Aivlosin and Ecomectin products.

The Group has recalculated the headroom as it would have been at March 2022 when comparing the net present value of cash flows to the
carrying value of goodwill on this modified basis.

The recoverable amount of the CGU is determined from value in use calculations. The key assumptions for the value in use calculations are those
regarding discount rates, growth rates and the estimated remaining useful life of the asset.

The Group prepares cashflow forecasts that cover the two-year period after the Statement of Financial Position date and then extrapolates them
assuming a 3% annual growth rate which is well below the past performance of the business. The Directors believe that the long-term growth rate
assumed does not exceed the average long-term growth rate for the relevant markets.

Management estimates discount rates using the pre-tax rates that reflect current market assessments of the time value of money and the risks
specific to the CGU. In the current year management estimated the applicable rate to be 7% (2022: 7%). Management considers that there is
adequate headroom when comparing the net present value of the cashflows to the carrying value of goodwill to conclude that no impairment
is necessary this year. On assumptions as at each period end the excess of recoverable amount over carrying value is over £118 million
(2022: reported as £44 million and recalculated as £162 million using the modified basis).

Management believes that the most significant assumption in the calculation of value in use is the estimated growth rate. However, even if
the growth rate were to be zero, the recoverable amount would still be over £102 million (2022: reported as £39 million and recalculated as
£141 million) more than the carrying value and no impairment would be necessary.

The group estimates that the discount rate applied when calculating the value in use would have to increase to a rate in excess of 45% before there
was an indication that the goodwill balance would need to be impaired (2022: recalculated as 57%).

The net book value of drug registrations, patents and license costs can be broken down as follows:

Aivlosin

Ecomectin

Vaccines

Others

2023
£000’s

13,353

637

3,386

101

2022
£000’s

13,945

754

1,296

130

17,477

16,125

Aivlosin is a highly effective antibiotic that treats a range of specific enteric (gut) and respiratory diseases in pigs and poultry, ensuring a rapid
return to health. In addition to the welfare benefits, healthy animals gain weight faster, digest food more efficiently and get to market earlier which all
bring economic benefit to the farmer. Substantial ongoing product development covering more formulations, species and diseases is expected to
substantially further increase its revenue generating potential. The remaining useful life is from 3 to 20 years.

Ecomectin is an endectocide that controls worms, ticks, lice and mange in grazing stock and pigs. The remaining useful life is 2 to 10 years.

At 31 March 2023 Intangible assets included £5,453,000 (2022: £3,502,000) of assets capitalised that had not commenced their useful life,
of which approximately £2,307,000 (2022: £2,044,000) were Aivlosin related products.

Drug registrations and licences are amortised over their estimated useful lives of 10 to 20 years, which is the Directors’ estimate of the time it
would take to develop a new product allowing for the Group’s patent protection and the exclusivity period which comes with certain registrations.
All such costs are recorded in the UK/Corporate reporting segment.

The group continuously reviews the status of its research and development activity, paying close attention to the likelihood of technical success
and the commercial viability of development projects. In the year to March 2023 there were no indications that an impairment was necessary
(2022: impairment of £2,085,000).

ECO Animal Health Group Plc Annual Report 2022/2313. Property, plant and equipment

Freehold Land
and Buildings
£000’s

Leasehold
improvements
£000’s

Plant and
Machinery
£000’s

Fixtures,
Fittings and
Equipment
£000’s

Motor Vehicles
£000’s

Group

Cost or valuation

At 31 March 2021

Additions

Disposals

Foreign exchange movements

At 31 March 2022

Additions

Disposals

Foreign exchange movements

At 31 March 2023

Depreciation

At 31 March 2021

Charge for the year

Disposals

Foreign exchange movements

At 31 March 2022

Charge for the year

Disposals

Foreign exchange movements

At 31 March 2023

Net Book Value

At 31 March 2023

At 31 March 2022

At 31 March 2021

667

709

(18)

(2)

720

(23)

(16)

(1)

(40)

(32)

(63)

657

669

644

555

605

146

751

(103)

(112)

(215)

(116)

(331)

420

390

452

787

1,305

(19)

114

2,187

2,813

(355)

(41)

4,604

(503)

(54)

(31)

(571)

(194)

265

(451)

4,153

1,616

284

1,748

233

(26)

2,012

465

(46)

(33)

2,398

(1,011)

(250)

(26)

(1,263)

(443)

269

287

107

(16)

(6)

372

(205)

(24)

(17)

(246)

(27)

Total
£000’s

4,026

1,624

(45)

195

5,800

3,562

(435)

(82)

8,845

(1,845)

(456)

(75)

(2,335)

(812)

334

(1,651)

(252)

(2,748)

747

749

737

120

6,097

3,465

2,181

The freehold land and buildings at Coombe Road, New Malden was valued at £565,000 at 31 March 2023 by Colliers International Property
Consultants Limited (external independent qualified valuers). The fair value of the freehold property was determined by applying a 7.5% discount
rate to the annual rental value of the property as determined by local market conditions. The Group considers the fair value of the property
determined. This property will continue to be valued on a regular basis.

Valuation Technique used

Significant unobservable inputs

RICS Valuation – Global Standards (‘Red Book
Global Standards’)

•

Estimated market rent

Capital Value

Price per square foot in local market

Yield in local market

General condition

Statutory searches

Environmental matters

Inter-relationship between key unobservable
inputs and fair value

Reduced marketability and hence rent
achievable by the property.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Notes to the Consolidated Financial Statements (continued)

In determining the fair value of freehold land and buildings level-3 fair value inputs are used. The Directors believe that the fair value of freehold land
and buildings reflects the carrying value and a significant change in unobservable inputs would not significantly increase or reduce the fair value of
the freehold land and buildings.

The freehold property of 78 Coombe Road, New Malden is subject to a legal charge held by the Company’s bankers dated 20 March 1987.

The value of the freehold property would have been recorded at £219,000 (2022: £229,000) on a historical cost basis.

Depreciation has been included in the administrative expenses line in the income statement, except for £275,000 (2022: £158,000) of depreciation
of production equipment in the Chinese subsidiary ECO Biok and for £9,011 (2022: £7,000) of depreciation in Pharmgate Animal Health USA LLC,
which are included within cost of sales.

Company

Cost or valuation

At 31 March 2021

Additions

At 31 March 2022

Additions

At 31 March 2023

Depreciation

At 31 March 2021

Charge for the year

At 31 March 2022

Charge for the year

At 31 March 2023

Net Book Value

At 31 March 2023

At 31 March 2022

At 31 March 2021

14. Investment property

Group and Company

At 31 March 2021

Revaluation in 2022

At 31 March 2022

Revaluation in 2023

At 31 March 2023

Freehold Land
and Buildings
£000’s

Fixtures,
Fittings and
Equipment
£000’s

615

(12)

(24)

(26)

(50)

565

591

603

125

183

(10)

(16)

(26)

(157)

(183)

157

Total
£000’s

673

125

798

(22)

(28)

(50)

(183)

(233)

565

748

651

Freehold Land
and Buildings
£000’s

305

(78)

227

230

The property in Western Road, Mitcham was valued at £230,000 as at 31 March 2023 by Colliers International Property Consultants Limited
(external independent qualified valuer). The fair value of the investment property was determined by applying an 8.36% discount rate to the annual
rental value of the property as determined by local market conditions.

ECO Animal Health Group Plc Annual Report 2022/23The value of the investment property would have been recorded at £130,000 on a historical cost basis.

Valuation Technique used

Significant unobservable inputs

RICS Valuation – Global Standards (‘Red Book
Global Standards’)

• Estimated market rent

• Capital value

Inter-relationship between key unobservable
inputs and fair value

Reduced marketability and hence rent
achievable by the property.

• Price per square foot in local market

• Yield in local market

• General condition

• Statutory searches

• Environmental matters

In determining the fair value of investment property level-3 fair value inputs are used. The significant unobservable inputs used in establishing
the fair value of investment property are the estimated market rent and capital value. The Directors believe that the fair value of investment
property reflects the carrying value and a significant change in unobservable inputs would not significantly increase or reduce the fair value of the
investment property.

During the financial period ended 31 Mar 2023, the Group agreed to sell the property for consideration of £230,000 and has classified this property
as assets held for sale.

15. Right-of-use assets

Group

Cost or valuation

At 31 March 2021

Additions

Disposals

Foreign exchange movements

At 31 March 2022

Additions

Disposals

Foreign exchange movements

At 31 March 2023

Depreciation

At 31 March 2021

Charge for the year

Disposals

Foreign exchange movements

At 31 March 2022

Charge for the year

Disposals

Foreign exchange movements

At 31 March 2023

Net Book Value

At 31 March 2023

At 31 March 2022

At 31 March 2021

Property
£000’s

Vehicles
£000’s

Other
£000’s

2,201

615

(366)

105

2,555

3,022

(29)

(161)

5,387

(878)

(355)

366

(21)

(888)

(402)

147

(18)

195

100

295

(75)

(38)

(95)

(50)

(22)

(18)

(5)

(1)

Total
£000’s

2,370

688

(406)

105

2,757

3,124

(29)

(161)

5,691

(971)

(398)

406

(21)

(984)

(452)

(1,263)

(145)

(1)

(1,409)

4,124

1,667

1,323

150

100

4,282

1,773

1,399

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Vehicles
£000’s

Other
£000’s

Total
£000’s

106

(32)

(16)

(48)

(7)

(6)

(22)

(21)

(7)

106

140

(38)

(16)

(47)

(22)

(69)

Notes to the Consolidated Financial Statements (continued)

Company

Cost or valuation

At 31 March 2021

Additions

Disposals

Foreign exchange movements

At 31 March 2022

Additions

Disposals

Foreign exchange movements

At 31 March 2023

Depreciation

At 31 March 2021

Charge for the year

Disposals

Foreign exchange movements

At 31 March 2022

Charge for the year

Disposals

Foreign exchange movements

At 31 March 2023

Net Book Value

At 31 March 2023

At 31 March 2022

At 31 March 2021

ECO Animal Health Group Plc Annual Report 2022/2316. Investments

Group

At 31 March 2021

Share of associate’s result for the year

Foreign exchange differences

At 31 March 2022

Share of associate’s result for the year

Foreign exchange differences

At 31 March 2023

Company

Cost

At 31 March 2021 Restated

Additional investment

At 31 March 2022 Restated

Disposal

At 31 March 2023

Impairment

At 31 March 2021

Impairment charge

Disposal

At 31 March 2022

Impairment charge

Disposal

At 31 March 2023

Net Book Value

At 31 March 2023

At 31 March 2022 Restated

At 31 March 2021 Restated

Investment in
Associate
£000’s

Unlisted
investments
£000’s

171

(11)

203

(5)

243

Unlisted
investments
(subsidiaries)
£000’s

21,047

183

21,230

(65)

21,165

(20)

Total
£000’s

180

(11)

212

(5)

252

Total
£000’s

21,047

183

21,230

(65)

21,165

(20)

21,165

21,210

21,027

21,165

21,210

21,027

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Notes to the Consolidated Financial Statements (continued)

The Company holds more than 20% of the share capital of the following companies:

Subsidiary undertakings held by the Company

Company

Registered office address

Zhejiang ECO Biok Animal Health
Products Limited

Zhongguan Industrial Area,
Deqing, Zhejiang Province

ECO Animal Health Limited

78 Coombe Road,
New Malden, Surrey, KT3 4QS

Subsidiary undertakings held by the Group

Country of registration or
incorporation

Class

Shares held %

P. R. China

Ordinary

Great Britain

Ordinary

100

Company

Registered office address

Country of registration or
incorporation

Class

Shares held %

ECO Animal Health Southern Africa
(Pty) Limited.

228 Athol Road, Highlands
North, Johannesburg 2192

South Africa

Ordinary

Zhejiang ECO Biok Animal Health
Products Limited.

Zhongguan Industrial Area,
Deqing, Zhejiang Province

P. R. China

Ordinary

100

51*

Shanghai ECO Biok Veterinary Drug
Sale Company Ltd. (via Zhejiang ECO
Biok Animal Products Ltd.)

Room 1502-3, Imago Plaza,
No. 99 Wuning Road,
Ptro District, Shanghai 200063

P. R. China

Ordinary

Zhejiang ECO Animal Health Limited

ECO Animal Health do Brasil Comercio
de Produtos Veterinarios Ltda.

ECO Animal Health Japan Inc.

ECO Animal Health USA Corp.

Interpet LLC.

ECO Animal Health de Mexico,
S de R.L. de C.V.

ECO Animal Health de Argentina S.A.

ECO Animal Health Malaysia Sdn. Bhd.

ECO Animal Health India (Private) Ltd

ECO Animal Health Europe Ltd

Zhongguan Industrial Area,
Deqing, Zhejiang Province

Av. Dr. Cardoso de Melo,
1470, Cl311, Villa Olimpia,
CEP 04548-005, Sao Paulo

1-2-1, Hamamatsu-cho,
Minato-Ku, Tokyo

344 Nassau Street, Princeton,
New Jersey, 08540

3775 Columbia Pike,
Ellicott City, Maryland, 21043

Av Techologico Sur 134-4,
Unidad Habitacional Moderna,
Queretaro, 76030

Calle 4 E 43/44 N: 581 P.6
D:B La Plata, Buenos Aires

10th Floor, Menara Hap Seng,
No 1 & 3, Jalan P Ramlee,
50250 Kuala Lumpur

No 33/5, Second Floor,
Mount Kailash Building,
Meanee Avenue Road,
Ulsoor Bangalore, Karnataka,
560042

6 Northbrook Road, Dublin 6,
Eire

P. R. China

Ordinary

100

Brazil

Japan

U.S.A.

Ordinary

100

Ordinary

100

Mexico

Ordinary

100

Argentina

Ordinary

100

Malaysia

Ordinary

100

India

Ordinary

100

Republic of Ireland

Ordinary

100

*The Group’s control over its China based subsidiary Zhejiang ECO Biok Animal Health Products Limited is achieved via a joint holding of 51% of
the entity’s Ordinary share capital between the Company (3%) and its UK based trading subsidiary ECO Animal Health Limited (48%).

ECO Animal Health Group Plc Annual Report 2022/23The principal activity of these undertakings for the last relevant financial year was as follows:

Company Name

ECO Animal Health Limited

Principal activity

Distribution of animal drugs

ECO Animal Health Southern Africa (Pty) Limited

Non-trading

Zhejiang ECO Biok Animal Health Products Limited

Manufacture of animal drugs

Shanghai ECO Biok Veterinary Drug Sale Company Ltd.

Distribution of animal drugs

Zhejiang ECO Animal Health Limited

Procurement of raw materials

ECO Animal Health do Brasil Comercio de Produtos Veterinarios Ltda

Distribution of animal drugs

ECO Animal Health Japan Inc.

ECO Animal Health USA Corp.

Interpret LLC

Distribution of animal drugs

Non-trading

ECO Animal Health de Mexico, S. de R. L. de C. V.

Distribution of animal drugs

ECO Animal Health de Argentina S.A.

ECO Animal Health Malaysia Sdn. Bhd

ECO Animal Health India (Private) Ltd

ECO Animal Health Europe Ltd

Non-trading

Zhejiang ECO Biok Animal Health Products Limited, Zhejiang ECO Animal Health Limited and ECO Animal Health do Brasil Comercio de Produtos
Veterinarios Ltda all have 31 December year ends. The Group receives management accounts for the three months to 31 March for these
subsidiaries for use in preparing the consolidated financial statements.

Interpet LLC has been excluded from consolidation as it holds no assets or liabilities and has ceased trading.

The following trading subsidiaries have no requirement for audit under local legislation:

ECO Animal Health do Brasil Comercio de Produtos Veterinarios Ltda.

ECO Animal Health Japan Inc.

ECO Animal Health USA Corp.

ECO Animal Health de Mexico, S. de R. L. de C. V.

ECO Animal Health Group PLC has given statutory guarantees against all the outstanding liabilities of ECO Animal Health Ltd, thereby allowing its
subsidiary to be exempt from the annual audit requirement under Section 479A of the Companies Act, for the year ended 31 March 2023.

Non-controlling interests
Zhejiang ECO Biok Animal Health Products Limited (Zhejiang ECO Biok) and Shanghai ECO Biok Veterinary Drug Sale Company Limited (Shanghai
ECO Biok), both 51% owned subsidiaries of the Group, have material non-controlling interests (NCI). Summarised financial information in relation to
these two subsidiaries is presented below together with amounts attributable to NCI.

Please note that as Shanghai ECO Biok is a 100% owned subsidiary of Zhejiang ECO Biok, the summarised results below are consolidated on
Zhejiang ECO Biok level, before wider group eliminations.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Notes to the Consolidated Financial Statements (continued)

Summarised statement of comprehensive income

For the year ended 31 March

Revenue

Cost of sales

Gross Profit

Administrative expenses

Operating profit/(loss)

Other income

Finance income

Profit before tax

Tax expense

Profit after tax

Profit allocated to NCI

Other comprehensive (loss)/income allocated to NCI

Summarised balance sheet

As at 31 March

Assets:

Property, plant and equipment

Right-of-use assets

Deferred tax assets

Inventories

Trade and other receivables

Cash and cash equivalents

Liabilities:

Trade and other payables

Contract liabilities

Lease liabilities - short term

Lease liabilities - long term

Summarised cash flows

For the year ended 31 March

Cash flows from operating activities

Cash flows from investing activities

Cash flows from financing activities

Foreign exchange movements

Net increase/(decrease) in cash and cash equivalents

2023
£000’s

24,122

(13,504)

10,618

(4,927)

5,691

345

(94)

5,942

(1,691)

4,251

2,083

(276)

2022
£000’s

26,803

(17,192)

9,611

(8,875)

736

854

(891)

(37)

(19)

1,099

2023
£000’s

2022
£000’s

860

3,445

5,047

3,925

14,877

28,154

1,742

1,080

585

3,061

6,468

2023
£000’s

15,802

(2,772)

(3,924)

(376)

8,730

1,960

1,080

14,081

6,300

6,148

29,572

4,489

144

1,040

5,684

2022
£000’s

(2,818)

(810)

(4,565)

690

(7,503)

ECO Animal Health Group Plc Annual Report 2022/23Joint Operations
The Group also holds (by means of its ownership of ECO Animal Health USA Corp.), a 50% interest in Pharmgate Animal Health LLC, which is
resident in the U.S.A. Pharmgate Animal Health LLC distributes the Group’s products in the U.S.A.

The Group also holds (by means of its ownership of ECO Animal Health Ltd) a 50% interest in Pharmgate Animal Health Canada Inc, which
distributes its products into Canada.

The Group also holds (by means of its ownership of ECO Animal Health Europe Ltd) a 50% interest in ECO-Pharm Limited, based in the Republic of
Ireland. ECO-Pharm Limited has not yet commenced trading.

Both Pharmgate Animal Health LLC and Pharmgate Animal Health Canada Inc. have accounting years which end on 31 December.

The Group’s holdings in each of the joint operations’ share capital is given in the table below:

Pharmgate Animal Health Canada Inc

Common Shares

Class A Shares

Class B Shares

Pharmgate Animal Health USA LLC

Common Shares

Class A Shares

Class B Shares

ECO-Pharm Limited

Common Shares

Class A Shares

Class B Shares

Holding
(shares)

100

Holding
(shares)

100

Holding
(shares)

25,000

Shares
in issue

200

100

Shares
in issue

200

100

Shares
in issue

50,000

Holding
%

100

Holding
%

100

Holding
%

100

In the case of Pharmgate Animal Health Canada Inc and Pharmgate Animal Health USA LLC, A shares carry the rights to dividends payable out of
profits attributable to the Group. These are made up of profits made by products supplied by the ECO Group plus 50% of any profit relating to new
products developed jointly by the partners to the joint operation.

In the case of ECO-Pharm Limited, profits attributable to the Group are made up of profits made by products supplied by the ECO Group plus 33%
of any profit relating to new products developed jointly by the partners to the joint operation.

The following amounts included in the Group’s financial statements are related to its interest in these joint operations.

Pharmgate Animal Health LLC

Pharmgate Animal Health

Canada Inc

Non-current assets

Current assets

Current liabilities

Sales

Profit after tax

2023
£000’s

2022
£000’s

1,175

1,871

(1,149)

(1,855)

11,672

12,640

2023
£000’s

614

(613)

3,499

2022
£000’s

631

(630)

3,756

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Notes to the Consolidated Financial Statements (continued)

Associated Company
The Group also holds (by means of its ownership of ECO Animal Health Japan Inc.) a 47.62% interest in EcoPharma.com which is resident in Japan.
This Company distributes Animal Health products and other general merchandise within Japan.

ECO Animal Health Japan Inc’s holding in EcoPharma.com is 10,000,000 shares out of a total of 21,000,000 shares.

The following amounts included in the Group’s financial statements are related to its interests in this associated Company.

Investments (share of net assets)

At 1 April

Share of results for the year

Foreign exchange movement

At 31 March

Summarised financial information

At 31 March

Current assets

Non-current assets

Current liabilities

Non-current liabilities

Net assets (100%)

Group share of net assets (47.62%)

Year ended 31 March

Revenue

Net profit

17. Inventories

Raw materials and consumables

Finished goods and goods for resale

Work in progress

2023
£000’s

2022
£000’s

203

(5)

243

171

(11)

203

2023
£000’s

2022
£000’s

831

(224)

(134)

510

243

2,122

744

222

120

428

204

1,897

Group

Company

2023
£000’s

9,252

7,660

5,497

2022
£000’s

9,772

13,277

7,093

22,409

30,142

2023
£000’s

2022
£000’s

The above total includes the provision of inventory amounting to £384,000 (2022: £146,000).

ECO Animal Health Group Plc Annual Report 2022/2318. Trade and other receivables

Non-current:

Amounts owed by group undertakings

Group

Company

2023
£000’s

2022
£000’s

2023
£000’s

2022
£000’s
Restated

51,526

52,742

The intercompany debt is due on demand, however the company has classified the receivable as a non-current asset as it does not expect to
realise the asset within 12 months after the reporting period.

Current:

Trade receivables

Other receivables

Amounts owed by group undertakings

Prepayments and accrued income

The ageing analysis of these trade receivables is as follows:

Current

Up to 3 months past due

3 to 6 months past due

Over 6 months past due

Movement on the Group provision for impairment of trade receivables is as follows:

Group

Company

2023
£000’s

2022
£000’s

2023
£000’s

2022
£000’s

24,813

23,388

1,312

725

660

1,921

825

248

26,850

25,969

1,073

210

338

Trade receivables

Net of impairment

2023
£000’s

2022
£000’s

2023
£000’s

2022
£000’s

20,241

20,849

19,922

20,849

4,097

1,772

3,932

1,751

711

609

346

615

677

282

346

442

25,658

23,582

24,813

23,388

Group

Balance at 1 April

Additional provision made

(Recovered) in the year

Written off in the year

Other

Balance at 31 March

2023
£000’s

194

646

(80)

(33)

118

845

2022
£000’s

351

(59)

(121)

194

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Notes to the Consolidated Financial Statements (continued)

19. Deferred tax

Group
Deferred tax assets and liabilities are attributable to the following:

Trade related temporary differences

Overseas trade related temporary differences

Freehold property

Investment property and assets held for sale

Plant and equipment

Deferred tax on pension scheme

Deferred tax on share options

Tax losses carried forward

Amount receivable/(payable) after more than one year

The movement on the deferred tax account can be summarised as follows:

Assets/(Liabilities)

2023
£000’s

(2,830)

(96)

(45)

3,448

559

Trade-related
temporary
differences
£000’s

Investment
property and
assets held
for sale
£000’s

Freehold
property
£000’s

Plant and
machinery
£000’s

Pension
scheme
£000’s

Share options
£000’s

At 31 March 2022

Credit/(Charge) for the
year through income
statement

At 31 March 2023

562

618

(1)

(109)

(96)

(45)

2022
£000’s

(2,586)

(109)

3,145

523

Total
£000’s

523

559

Trade related temporary differences relate predominantly to research and development tax deductions claimed in advance of expense recognition
in the income statement, carried forward trading losses and a provision for unrealised profit arising on consolidation. The tax losses carried forward
are not expected to expire under current legislation.

Any future dividend received from the Chinese subsidiary Zhejiang ECO Biok Animal Health Products Limited will be subject to a 5% withholding tax.
The deferred tax liability in respect of this has not been recognised.

Company

At 31 March 2021

Credit for the year through income statement

Credit for the year through reserves

At 31 March 2022

Credit for the year through income statement

At 31 March 2023

Investment
property and
assets held
for sale
£000’s

Freehold
property
£000’s

Pension
scheme
£000’s

Share options
£000’s

Total
£000’s

(2)

(1)

(45)

(38)

At 31 March 2023 the Group has recognised a deferred tax asset in respect of carried forward UK trading losses of £10,489,000 (2022:
£10,489,000). At 31 March 2023 the Group has unrecognised carried forward excess UK trading losses of £4,613,000 (2022: £3,185,000) and
unrecognised carried forward overseas trading losses of £1,319,000 (2022: £1,508,000). These tax losses are not expected to expire.

ECO Animal Health Group Plc Annual Report 2022/2320. Cash and cash equivalents

Cash and cash equivalents comprise cash, short-term deposits held by the Group net of amounts outstanding on bank overdraft. The carrying
amount of these assets are not significantly different to their fair value.

Cash and cash equivalents

Cash and cash equivalents presented in the statement of cash flows

Group

Company

2023
£000’s

21,658

2022
£000’s

14,314

2023
£000’s

388

2022
£000’s

279

Balances drawn on the bank overdraft facility are repayable on demand and form an integral part of the cash management of the Group and
Company. In the statement of cash flows, the Group and the Company have presented cash and cash equivalents net of balances outstanding on
bank overdrafts. Amounts drawn and repaid on the overdraft facility are therefore considered as part of changes in cash and cash equivalents and
are not presented as financing cash flows.

Cash and short-term deposits held in China are subject to local exchange control regulations. These regulations provide for restrictions on
exporting capital from those countries, other than through normal dividends. The carrying amount of the assets included within the consolidated
financial statements to which these restrictions apply is £17.6m (2022: £8.1m).

Significant non-cash transactions from investing activities are as follows:

Acquisition of property, plant and equipment by means of leases or not yet
paid at year end

Acquisition of intangible assets not yet paid at year end

21. Trade and other payables

Group

Company

2023
£000’s

3,124

306

2022
£000’s

688

106

2023
£000’s

2022
£000’s

Trade payables

Contract liabilities

Other payables

Accruals and deferred income

22. Borrowings

Cash and cash equivalents

Lease liabilities

Net Cash

Group

Company

2023
£000’s

6,124

1,079

667

6,653

2022
£000’s

9,415

203

926

2,410

14,523

12,954

2023
£000’s

194

281

520

Group

Company

2023
£000’s

2022
£000’s

21,658

14,314

(4,480)

(1,910)

17,178

12,404

2023
£000’s

388

(75)

313

The Group has an overdraft facility in certain currencies in respect of a pool of bank accounts held with NatWest Bank plc.

2022
£000’s

206

326

2022
£000’s

279

(62)

217

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Notes to the Consolidated Financial Statements (continued)

The interest rate for all currency overdrafts is 1.8% over the relevant currency base rate and the borrowings are secured by two debentures held over the
assets of the Group. Any drawdown of this facility is repayable on demand. The Company and ECO Animal Health Limited have each given a guarantee to
the Group’s bankers for the overdraft facility. The facility has a gross and net limit of £5,000,000, which may be borrowed and repaid at will.

At 31 March 2023, the undrawn facility was £5,000,000 (2022: £5,000,000).

The Group put in place a £10m revolving credit facility with Natwest bank on 9 July 2022. This facility is interest bearing and can be drawn by the
Group on demand, The facility expires on 30 June 2026.

Reconciliation of Lease Liabilities

Opening lease liabilities

New lease liabilities

Repayment

Lease liabilities interest

Disposal

Foreign exchange

Closing lease Liabilities

Current lease liabilities

Non-current lease liabilities

Group

Company

2023
£000’s

(1,910)

(3,327)

387

(205)

575

2022
£000’s

(1,522)

(672)

483

(111)

(88)

(4,480)

(1,910)

(884)

(397)

(3,596)

(1,513)

2023
£000’s

2022
£000’s

(62)

(22)

(12)

(75)

(41)

(34)

(39)

(37)

(11)

(62)

(13)

(49)

The Group leases a number of properties and motor vehicles in the jurisdictions it operates in. At 31 March 2023 there were no termination or
extension options on leases.

The Group expensed £48,000 for the year ended 31 March 2023 (2022: £64,000) for short term leases.

Group Leases Maturity
At 31 March 2023 the Group held the following number of leases in each of the maturity categories below.

At 31 March 2023

Up to 1 year

Between 1 - 5 years

Over 5 years

Total number of leases

Average remaining lease term (in years)

At 31 March 2022

Up to 1 year

Between 1 - 5 years

Over 5 years

Total number of leases

Average remaining lease term (in years)

Property
Number

Vehicle
Number

Other
Number

Total
Number

8.3

2.7

3.3

5.3

Property
Number

Vehicle
Number

Other
Number

Total
Number

6.5

1.2

4.7

4.9

ECO Animal Health Group Plc Annual Report 2022/23Amounts payable under lease arrangements for the Group
The undiscounted contractual cash flows payable under the existing lease arrangements at 31 March are analysed into the following maturity
categories.

Group

Up to 1 year

Between 1 - 5 years

Over 5 years

Total

23. Provisions

At March 2021

Charge for year through income statement

Foreign Exchange

At 31 Mar 2022

Charge for year through income statement

Foreign Exchange

At 31 March 2023

2023
£000’s

896

2,503

1,983

5,382

Litigation
£000’s

Overseas tax
£000’s

Other
£000’s

456

1,782

1,003

634

3,419

1,214

(35)

4,598

124

2022
£000’s

523

1,104

1,391

3,018

Total
£000’s

1,782

1,459

634

3,875

1,338

(35)

5,178

Provisions include an amount of £456,000 in respect of personnel related litigation matters. Management has assessed the range of possible
outcomes to these claims and the provision made represents a best estimate, and is mid-range of the possible outcomes, having taken legal
advice. ECO management is vigorously defending the claims and the timing of any settlement is uncertain due to the varying nature of the claims
and the availability of the relevant courts if required.

Provisions also include an amount of £4,598,000 in respect of overseas tax liabilities. Certain aspects of a sales tax related to imported products
in a Group subsidiary might have been applicable. The subsidiary has been importing an increasing volume of product into this country in recent
years. This matter is at an early stage and subject to further review of the tax legislation and case law. No tax payment has yet been determined.
However, a substantial tax settlement may be required in due course and a provision has been recognised.

24. Pension and other post-retirement benefit commitments

Defined Contribution Pension Scheme
The Group operates defined contribution pension schemes. The assets of the schemes are held separately from the Group and independently
administered by insurance companies. The pension cost charge represents contributions payable to the funds in the year and amounted to
£90,845 (2022: £96,850).

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Notes to the Consolidated Financial Statements (continued)

Defined Benefit Pension Scheme
The Group operates a defined benefit scheme in the UK for a number of ex-employees which is closed to new members. A full actuarial valuation
was carried out at 6 April 2022 and updated to 31 March 2023 for IAS 19 purposes by a qualified independent actuary. The major assumptions
used by the actuary were:

Discount rate

Pension revaluation

Inflation assumption with a maximum of 5% p.a.

31 March 2023

31 March 2022

4.85%

3.30%

2.75%

3.95%

Mortality rates
No pre-retirement mortality is assumed (2022: none). Post retirement mortality is based on 100% of the SAPS “S2” normal tables, based on the
members’ year of birth, improving in line with CMI 2021 projections with a 1.25% long term trend rate (2022: 1.25%).

Under these mortality assumptions, the expected future lifetime for a member retiring at age 65 at the year-end would be 22.2 years for males
(2022: 22.2 years) and 24.4 years for females (2022: 24.3 years). For members retiring in 20 years’ time, the expectation of life would be 23.6 years
for males (2022: 23.5 years) and 25.8 years for females (2022: 25.8 years).

The weighted average term of the liabilities is 8 years (2022: 10 years).

The scheme is exposed to a number of risks including:

•

Interest rate risk: Movements in the discount rate used could affect the present value of the defined benefit pension obligations.

• Longevity risk: Changes in the estimated mortality rates of former employees could affect the present value of the defined benefit pension

obligations.

•

Investment risk: Variations in the actual return from the scheme’s investments could affect the scheme’s ability to meet its future pension
obligations.

Assets at start of year

Defined benefit obligation at start of year

Net asset/(liability) at 1 April

Return on assets

Interest cost

Gain/(loss) from asset return

Gain/(Loss) from changes in assumptions

Gain/(loss) from experience

Statement of other comprehensive income

Employer contributions (gross)

Net asset at 31 March

Actual assets at end of year

Actual defined benefit obligation at end of year

2023
£000’s

1,648

(1,569)

2022
£000’s

1,795

(1,799)

(4)

(43)

100

181

(33)

(5)

1,135

(954)

1,648

(1,569)

Gain/(loss) on changes in assumptions was nil (2022: nil) relating to changes in demographic assumptions and a gain of £43,000 (2022: £29,000
gain) relating to changes in financial assumptions.

ECO Animal Health Group Plc Annual Report 2022/23The pension fund assets (principally made up of annuities for the benefit of active pensioners) are all held within a policy managed by an insurance
company regulated by the Financial Conduct Authority of the United Kingdom and the United Kingdom Pensions Regulator. By law, the trustees are
required to act in the best interests of participants to the schemes. Responsibility for governance of the plans – including investment decisions and
contributions schedules lies with trustees.

Reconciliation of changes in the asset value during the year

Fair value of assets at 1 April

Return on assets

Gain/(loss) on asset return

Employer contributions (gross)

(Decrease)/increase in secured pensioners’ value due to scheme experience

Benefits paid

Fair value of assets at 31 March

Reconciliation of changes in the liability value during the year

Defined benefit obligation at 1 April

Interest cost

Past service cost

(Gain)/loss on changes in assumptions

(Decrease)/increase in secured pensioners’ value due to scheme experience

Benefits paid

Defined benefit obligation at 31 March

The amount of annual contribution to be paid by the employer of £58,000(2022: £59,000) is expected to continue until December 2023.

Year ended 31 March

Fair value of plan assets

Present value of defined benefit obligation

(Deficit)/Surplus in plan

Experience (losses)/gains on plan liabilities

Plan Assets

Assets under management

Annuities

Total

2023
£000’s

1,135

954

181

2022
£000’s

1,648

1,569

(5)

2021
£000’s

1,795

1,799

(4)

2020
£000’s

1,795

1,814

(27)

(2)

2023
£000’s

291

844

1,135

2023
£000’s

2022
£000’s

1,648

1,795

(575)

1,135

(5)

(234)

1,648

1,569

1,799

(40)

(43)

(575)

954

(29)

(234)

1,569

2019
£000’s

1,802

1,899

(97)

(38)

2022
£000’s

259

1,389

1,648

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Notes to the Consolidated Financial Statements (continued)

Assets under management composition

Corporate Bonds

Overseas Equities

UK Equities

Property

Cash

2023

43.0%

29.2%

17.6%

7.8%

2.4%

2022

42.6%

27.7%

17.8%

10.5%

1.4%

100.0%

Defined benefit obligation – sensitivity analysis
The following amounts are the effect (on the defined benefit obligation) of reasonably possible changes to the key actuarial assumptions, as
required by IAS 19.

Actuarial assumptions

Discount rate

Members’ life expectancy

Reasonably
Possible
Change

+/- 0.1%

+/- 1 year

(Decrease)/Increase in Defined Benefit Obligation

2023

2022

£000’s

(62)

(64)

(15)

(84)

The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to
occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant
actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end
of the reporting period) has been applied as when calculating the defined benefit liability recognised in the Statement of financial position.

The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.

The Company has given a floating charge dated 1 December 2006 over all of its assets to the trustees of the pension fund to secure all present
and future obligations and liabilities to the pension fund.

25. Share-based payments

The expense recognised for share-based payments made during the year is shown in the following table:

Total expense arising from equity settled share-based payments
transactions

The share-based payment plans are described below:

Group

Company

2023
£000’s

2022
£000’s

2023
£000’s

2022
£000’s

408

342

179

120

ECO Animal Health Group Plc Annual Report 2022/23Movements in issued share options during the year
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the period:

Outstanding at 1 April

Granted during the year - Employee scheme

Granted during the year - LTIPs

Granted during the year - Deferred bonus

Cancelled during the period

Exercised during the period

Outstanding at 31 March

Granted < 3 years ago and not vested

Exercisable at 31 March

Options

2023

000's

3,866

551

(1,686)

2,777

(1,239)

1,538

2023

WAEP (£)

3.47

0.05

3.20

2.84

4.47

2022

000's

3,370

327

279

(122)

(26)

3,866

(643)

3,223

2022

WAEP (£)

3.73

3.50

0.05

2.01

2.42

3.47

3.81

1,537,850 options were exercisable at 31 March 2023 (2022: 3,223,400). The WAEP of exercisable options at 31 March 2023 was 447.0p
(2022: 381.0p).

The average share price during the year was 111.2p (2022: 272.4p).

The maximum aggregate number of shares over which options may currently be granted cannot exceed 10% of the nominal share capital of
the Company on the grant date. The options outstanding at 31 March 2023 had a weighted average exercise price of £2.84 (2022: £3.47) and a
weighted average remaining contractual life of 4.7 years (2022: 2.8 years).

ECO Animal Health Group plc Executive Share Option Scheme
In accordance with the Executive Share Option Scheme, approved and unapproved share options are granted to Directors and employees who
devote at least 25 hours per week to the performance of duties or employment with the Group.

No share options have been granted in the year under this scheme (2022: 326,679). In addition 550,953 options have been issued under the
group’s Long Term Incentive Plan (2022: 278,500) and 45,606 under the group’s deferred bonus arrangements (2022: 37,755).

The exercise price of the options is equal to the market price of the shares at the date of grant. The options vest three years from the date of
grant and if the option holder ceases to be a Director or employee of the Company due to injury, disability, redundancy or retirement on reaching
pensionable age or any other age at which they are bound to retire at in accordance with the terms of their contract of employment, the option may
be exercised within a period of six months after the option holders so ceasing, although the Board may, at its discretion, extend this period by up to
36 months after the date of cessation.

If the option holder ceases employment for any other reason, the option may not be exercised unless the Board permits. The approved and
unapproved options will be forfeited where they remain unexercised at the end of their respective contractual lives of ten and seven years
respectively.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Notes to the Consolidated Financial Statements (continued)

An analysis of the expiry dates of the outstanding options at 31 March 2023 is given below:

Date of grant

09 October 2013

21 August 2014

13 February 2015

26 August 2015

19 January 2016

17 February 2016

01 March 2016

12 September 2016

15 September 2016

21 September 2017

12 April 2018

23 October 2018

19 December 2018

28 April 2021*

28 April 2021

24 September 2021

12 December 2022

27 February 2023*

Unapproved

Approved

Exercise price

Expiry date

351,900

398,000

8,600

11,400

23,700

22,850

10,200

19,600

9,600

23,100

2,000

£ 1.960

09 October 2023

£ 1.615

21 August 2024

£ 2.005

13 February 2025

£ 2.650

26 August 2025

£ 3.150

19 January 2026

£ 3.125

17 February 2023

£ 3.125

01 March 2026

£ 4.325

12 September 2026

£ 4.325

12 September 2023

£ 4.350

15 September 2026

£ 4.350

15 September 2023

45,125

£ 6.200

21 September 2027

266,875

£ 6.200

21 September 2024

265,800

2,200

326,679

3,900

65,200

7,800

£ 5.450

12 April 2028

£ 3.800

23 October 2028

£ 3.800

23 October 2025

£ 3.800

19 December 2028

£ 3.800

19 December 2025

£ 0.050

28 April 2028

154,149

£ 3.495

29 April 2031

124,351

37,755

45,606

550,953

£ 3.495

28 April 2028

£ 0.050

24 September 2028

£ 0.050

12 December 2029

£ 0.050

27 February 2030

2,370,119

407,224

*These are the options where a TSR criterion affects the price.

The market price of the shares at 31 March 2023 was 96.5p (2022: 165.0p) with a range in the year of 82.5p to 165.0p (2022: 127.5p to 395.0p).

The Company uses a Black-Scholes model to value share-based payments for options with service conditions and/or non-market performance
conditions and the following table lists the inputs to this model for the last five years.

Vesting period (years)

Option expiry (years)

Dividends expected on the shares

Risk free rate (average)

Volatility of share price

2023

3 - 4

0.00%

3.20% - 3.75%

40%

2022

3 - 4

7 - 10

1.00%

0.18%

40%

Weighted average fair value (pence)

84.0 -108.0

101.0 - 316.0

2021

n/a

2020

n/a

2019

7 - 10

1.90%

1.00%

20.00%

51.0

The risk-free rate has been based on the yield from UK Government Treasury coupons. The volatility of the share price was estimated based on
standard deviation calculations on the historic share price.

ECO Animal Health Group Plc Annual Report 2022/23Long term incentive plan
Under this plan share options may be granted to certain Executive Directors and members of the Company’s Executive Leadership Team.
The share options awarded under the LTIP are subject to an exercise price of £0.05 per share and performance conditions being achieved that
have been set by the Remuneration Committee and relate to total shareholder return (TSR) and research and development targets.

Subject to the performance conditions being met, the share Options will vest after the end of a three year vesting period from 1 April 2022 to
31 March 2025. The proportion of share options relating to each performance condition is: (i) 75% in relation to the TSR conditions; and (ii) 25% in
relation to the R&D targets.

The TSR conditions mean that the share options subject to these conditions will vest subject to the following: (i) 25% of the share options will vest
if the annual compound TSR over the performance period equals 7.5%; (ii) 50% of the share options will vest if the annual compound TSR over the
performance period equals 10%; and (iii) 100% of the share options will vest if the annual compound TSR over the performance period equals 20%.
The TSR conditions are modelled using the Cox, Ross and Rubenstein binomial option pricing model for which the key inputs are the starting equity
value, a time period of three years, an assumption that the equity value changes once every three months, the volatility of the share price, and the
dividend yield.

The R&D targets mean that the share options subject to these targets will vest subject to the following: (i) 25% of the shares options will vest if
specified R&D targets agreed between Executive Management and the Remuneration Committee during the performance period are achieved; and
(ii) 100% of the shares options will vest if specified R&D targets agreed between Executive Management and the Remuneration Committee during
the performance period are achieved. The R&D targets comprise a range of identifiable and quantifiable criteria relating to the introduction of new
R&D projects, the progress of existing R&D projects to later stages of the development cycle, the submission of projects for approval to relevant
regulators and for the approval of projects by the relevant regulators.

26. Share capital

Authorised

68,100,000 ordinary shares of 5p each

10,790 deferred ordinary shares of 10p each

32,334 convertible preference shares of £1 each

Allotted, called up and fully paid

67,721,916 (2022: 67,721,916) ordinary shares of 5p each

2023
£000’s

2022
£000’s

3,405

3,438

3,381

During the year no shares were issued. (2022: 25,500 shares at a premium of £61,000 as a result of the exercise of options by employees).

All share issued are non-redeemable and rank equally in terms of voting rights (one vote per share); rights to participate in all approved dividend
distribution for that class of shares; and right to participate in any capital distribution on winding up.

The shares in the original or any increased capital of the Company may be issued with such preferred, deferred or other special rights or
restrictions, whether in regard to dividend, voting, return of capital as the Company may from time to time determine.

27. Non-controlling (minority) interests

Balance as at 1 April

Share of subsidiary's (loss)/profit for the year

Share of foreign exchange gain/(loss) on net investment

Share of dividend paid by subsidiary

Balance as at 31 March

2023
£000’s

12,284

2,083

(276)

1,807

(1,810)

12,281

2022
£000’s

13,414

(19)

1,099

1,080

(2,210)

12,284

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Notes to the Consolidated Financial Statements (continued)

28. Other reserves

The Group and Company held a Capital redemption reserve of £106,000 as at 31 March 2023 (2022: £106,000).

Included in the Group’s foreign exchange reserve are the following exchange movements on consolidation of the subsidiaries and joint operations
listed below:

In respect of:

Zhejiang ECO Biok Animal Health Products Limited

Zhejiang ECO Animal Health Limited

ECO Animal Health do Brasil Comercio de Produtos Veterinarios Ltda

ECO Animal Health Japan Inc.

ECO Animal Health USA Corp.

ECO Animal Health de Mexico, S. de R. L. de C. V.

ECO South Africa

Pharmgate LLC

At 31 March
2022
£000’s

Movement in
the year
£000’s

At 31 March
2023
£000’s

1,385

186

311

237

(287)

133

(91)

(34)

(86)

103

(49)

1,098

319

220

(20)

(35)

340

(49)

Foreign exchange reserve movements charged to Consolidated Statement of
Comprehensive Income

2,188

(310)

1,878

29. Directors’ emoluments

Emoluments for qualifying services

Company pension contributions to money purchase schemes

Share-based payments

Benefits in kind

2023
£000’s

1,009

1,107

2022
£000’s

793

112

941

During the year no directors exercised share options (2022: none) realising a gain of £nil (2022: £nil).

The highest paid director received £497,000 (2022: £430,000) including £6,000 (2022: £65,000) of share-based payments and nil (2022: £9,000)
of pension contributions.

ECO Animal Health Group Plc Annual Report 2022/2330. Employees

Number of employees
The average number of employees (including Directors) during the year was:

Directors

Production and development

Administration

Sales

Employment costs (including amounts capitalised)

Wages and salaries

Share-based payments

Social security costs

Other pension costs

2023
Number

2022
Number

234

2023
£000’s

13,045

408

1,600

408

221

2022
£000’s

12,251

341

1,185

277

15,461

14,054

31. Related party transactions

Dividends paid to related parties
During the year Mr P Lawrence (a significant shareholder) and his family received no dividends (2022: £66,960).

The other Directors and their families received dividends to the value of £nil (2022: £nil).

Interest and management charges from Parent to the other Group companies
During the year the Company made management charges on an arm’s length basis to ECO Animal Health Limited amounting to £750,000 (2022:
£687,267) and charged interest of £1,224,705 (2022: £832,000) to the subsidiary company. Both of these transactions were made through the
inter-company account and were eliminated on consolidation.

During the year Zhejiang ECO Animal Health Ltd paid dividends to ECO Animal Health Ltd of £4,167,710 (RMB 33,300,000)

During the year Zhejiang ECO Biok Animal Health Products Limited paid dividends of £144,828 (RMB 900,000) to ECO Animal Health Group plc
(2022: £176,717) and £1,739,409 (RMB 15,300,000) to ECO Animal Health Limited (2022: £2,122,406).

Key management compensation
The Group regards the Board of Directors as its key management.

Emoluments for qualifying services

Company pension contributions to money purchase schemes

Share-based payments

Benefits in kind

The number of Directors for which retirement benefits were accruing was 2 (2022: 2).

2023
£000’s

881

979

2022
£000’s

793

112

941

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Notes to the Consolidated Financial Statements (continued)

32. Financial instruments

The Group uses financial instruments comprising borrowings, cash and cash equivalents and various items, such as trade receivables, trade
payables etc. that arise directly from its operations. The main purpose of these financial instruments is to raise finance for the Group’s operations.
The Directors are responsible for the overall risk management.

The main risks arising from the Group’s use of financial instruments are capital and liquidity risk, credit risk and foreign currency risks and they are
summarised below. The policies have remained unchanged throughout the year.

Capital and liquidity risk
The Group manages its capital to ensure continuity as a going concern whilst maximising returns through the optimisation of debt and equity. As
part of this, the Board considers the cost and risk associated with each class of capital. The capital structure of the Group consists of cash and
cash equivalents in note 20, borrowings in note 22 and equity attributable to equity holders of the parent comprising issued capital, reserves and
retained earnings as disclosed in the Group’s statement of changes in equity.

Liquidity risk is managed by maintaining adequate reserves and banking facilities with continuous monitoring of the latest developments by
management.

The Group’s objectives when maintaining capital are:

•

to safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other
stakeholders; and

•

to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.

The Group sets the amount of capital it requires in proportion to risk. The group manages its capital structure and makes adjustments to it in the
light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the
Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets to reduce debt.

As an AIM quoted company, our governance framework is underpinned by the AIM Rules and the Quoted Companies Alliance (QCA) Corporate
Governance Code 2018 (the ‘QCA Code’). In addition to the QCA Code, we monitor developments and guidance in the UK Corporate Governance
Code, applicable to main market listed companies, to keep abreast of matters which we feel could also be embedded as best practice as part of a
progressive approach. We also review the Investment Association guidelines and seek to comply with these where applicable.

At 31 March 2023, the Group was contractually obliged to make repayments as detailed below:

Within one year or on demand

Trade payables

Other payables

Accruals

2023
£000’s

6,124

565

6,653

2022
£000’s

9,415

926

2,410

13,342

12,751

Credit Risk
Credit risk is that of financial loss as a result of default by a counterparty on its contractual obligations. The Group’s exposure to credit risk arises
principally in relation to trade receivables from customers and on short term bank deposits. Customers’ creditworthiness is wherever possible
checked against independent rating databases and filing authorities, or otherwise assessed on the basis of trade knowledge and experience.
Exposure and customer credit limits are continually monitored both on specific debts and overall.

The credit risk in relation to short term bank deposits is limited because the counterparties are banks with good credit ratings.

The Group operates in certain geographical areas which are from time to time subject to restrictions in the free movement of funds. The Board
seeks to minimise the Group’s exposure to these markets but the nature of our business makes it impossible to eliminate this exposure completely.

None of those receivables has been subject to a significant increase in credit risk since initial recognition and, consequently, 12-month expected
credit losses have been recognised, and there are no non-current receivable balances lifetime expected credit losses.

ECO Animal Health Group Plc Annual Report 2022/23Currency risk
The Group operates in overseas markets particularly through its subsidiaries in China, Brazil, Mexico, the USA and Japan as well as its joint
operation in Canada and is therefore subject to currency exposure on transactions undertaken during the year. The Group does some simple
economic hedging of receivables when the Board feels it is appropriate to do so and foreign exchange differences on retranslation of foreign
monetary items are recorded in administrative expenses in the income statement.

The table below shows the extent to which the Group companies have monetary assets and liabilities in currencies other than in Sterling

2023

Trade and other receivables

Trade and other payables

US Dollar
£000’s

34,969

(25,436)

Euros
£000’s

2,013

(479)

Chinese
RMB
£000’s

3,880

(5,258)

Cash and cash equivalents

2,162

515

17,736

Total

2022

Trade and other receivables

Trade and other payables

Cash and cash equivalents

Total

11,695

2,049

16,358

US Dollar
£000’s

9,027

(3,912)

4,752

9,867

Euros
£000’s

2,068

(425)

366

Chinese
RMB
£000’s

6,789

(4,701)

8,261

2,009

10,349

Japanese
Yen
£000’s

303

(449)

240

Japanese
Yen
£000’s

123

(158)

120

Brazilian
Real
£000’s

3,251

(49)

265

3,467

Brazilian
Real
£000’s

1,964

(97)

145

2,012

Canadian
Dollar
£000’s

Mexican
Peso
£000’s

752

(673)

180

259

335

125

460

Canadian
Dollar
£000’s

Mexican
Peso
£000’s

806

(426)

208

588

2,648

(350)

311

2,609

Other
£000’s

153

(125)

Other
£000’s

108

(67)

133

At 31 March 2023 the Group was mainly exposed to the US Dollar, Euro, Chinese RMB, Japanese Yen, Brazilian Real, Canadian Dollar and Mexican
Peso. The following table details the effect of a 10% movement in the exchange rate of these currencies against sterling when applied to
outstanding monetary items denominated in foreign currency as at 31 March 2023.

U S Dollar

Euro

Chinese RMB

Japanese Yen

Brazilian Real

Canadian Dollar

Mexican Peso

2023
£000’s

1,300

228

1,818

385

2022
£000’s

1,096

223

1,150

224

290

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORTECO Animal Health Group Plc Annual Report 2022/23Notes to the Consolidated Financial Statements (continued)

Analysis of financial instruments by category

Group
2023

Trade and other receivables

Cash and cash equivalents

Trade and other payables

Amounts due under leases

2022

Trade and other receivables

Cash and cash equivalents

Trade and other payables

Amounts due under leases

Company
2023

Trade and other receivables

Cash and cash equivalents

Trade and other payables

Amounts due under leases

Amounts due from group undertakings

2022

Trade and other receivables

Cash and cash equivalents

Trade and other payables

Amounts due under leases

Amounts due from group undertakings

Financial
assets
£000’s

26,865

21,658

£000’s

24,048

14,314

Financial
assets
£000’s

723

388

51,526

Financial
liabilities
£000’s

(13,339)

(4,480)

£000’s

(12,801)

(1,910)

Financial
liabilities
£000’s

(418)

(76)

£000’s

128

279

53,940

(376)

(62)

Total
£000’s

26,865

21,658

(13,339)

(4,480)

£000’s

24,048

14,314

(12,801)

(1,910)

Total
£000’s

723

388

(418)

(76)

51,526

£000’s

128

279

(376)

(62)

53,940

All financial assets and liabilities in the Group’s and Company’s statements of financial position are classified as held at amortised cost for both the
current and previous year.

33. Post balance sheet events

Disposal of property in New Malden
The Group accepted an offer of £795,000 for the property located at Coombe Road, New Malden, and expect to complete in the financial year
ending 31 March 2024. The sale is subject to contract. As at 31 March 2023, the carrying value of the property was £565,000.

ECO Animal Health Group Plc Annual Report 2022/23Contents

Strategic Report

Financial Highlights

Operations Highlights

Chairman and Chief Executive’s Combined
Statement

Finance Director’s Report

Principal Risks and risk management

Corporate Governance

Corporate Governance Report

Directors’ Report

Independent Auditor’s Report

Financial Statements

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated Statement of Changes in Equity

Statement of Changes In Equity

Statements of Financial Position

Statements of Cash Flows

Notes to the Consolidated Financial Statements

DIRECTORS
AND ADVISERS

Directors

Andrew Jones

Non-Executive Chairman

David Hallas

Chief Executive

Christopher Wilks Finance Director

Frank Armstrong

Non Executive Director

Tracey James

Non Executive Director

Secretary

Christopher Wilks

Company Number

1818170

Registered Office

Registered Auditors

Registrars

Lawyers

Bankers

Nominated Adviser
And Broker

Joint Broker

The Grange
100 High Street
London
N14 6BN

Haysmacintyre LLP
10 Queen Street Place
London
EC4R 1AG

Share Registrars Limited
3 The Millennium Centre
Crosby way
Farnham
Surrey
GU9 7XX

Mills & Reeve LLP
24 King William Street
London
EC4R 9AT

Natwest plc
Tooting Branch, 30 High Street
London
SW17 0RG

Singer Capital Markets
One Bartholomew Lane
London
EC2N 2AX

Investec
30 Gresham Street
London
EC2V 7QP

Registered Office

The Grange,
100 High Street,
Southgate,
N14 6BN

Tel: +44 (0)20 8447 8899

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ECO ANIMAL HEALTH
GROUP PLC

www.ecoanimalhealthgroupplc.com

Annual Report & Accounts

for the year ended 31 March 2023